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Chipotle predicted to report shocking sales drop

Lawrence Lewitinn
Lawrence Lewitinn

Chipotle’s (CMG) health issues are taking a toll on the company’s sales, according to data compiled by location-based app Foursquare.

The restaurant was already seeing a small seasonal decline in foot traffic in the winter of 2015. But the real trouble began in October 2015, when E. coli was reported at several Northwest locations. Health issues followed at other locations in subsequent months. Chipotle even closed all of its more than 1,900 locations on February 8 for a “food-safety meeting”.

Foursquare predicts Chipotle’s first-quarter same-store sales are going to be terrible when the restaurant chain reports on April 26. Based on its 50 million users’ data, Foursquare expects a 30% decline in Chipotle’s same-store sales in Q1 2016 compared to Q1 2015.

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To be sure, Foursquare expects Chipotle will have “only” a 23% drop in same-store foot traffic but revenues will be lower because Chipotle used coupons to attract people, not revenues.

Even worse for the restaurant, formerly loyal customers have been frightened away. Last summer, 20% of its customers made up 50% of Chipotle’s foot traffic, according to Foursquare’s data. However, those loyal customers were 50% more likely to avoid Chipotle since news of the health scandals broke.

“Losing two to three loyal customers is the equivalent of losing about 10 other customers,” wrote Foursquare’s CEO Jeff Glueck in his blog post. Instead, data show those loyal customers are now going to McDonald’s (MCD), Starbucks (SBUX), and Whole Foods (WFM).

Since October 31, 2015, when the E. coli scandal first hit, Chipotle’s stock is down 29%.

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