Chipotle gets served
Jan. 6, 2016
by Erica Shaffer
Chipotle is the subject of a federal criminal investigation.
DENVER – The federal government has opened a criminal probe regarding a norovirus incident at a Chipotle restaurant in Simi Valley, Calif., the company reported in a filing with the Securities and Exchange Commission. The US Attorney’s Office for the Central District of California is conducting the investigation in conjunction with the US Food and Drug Administration’s Office of Criminal Investigation.
“The subpoena requires us to produce a broad range of documents related to a Chipotle restaurant in Simi Valley, California, that experienced an isolated norovirus incident during August 2015,” the company said in the SEC filing. “We intend to fully cooperate in the investigation. It is not possible at this time to determine whether we will incur, or to reasonably estimate the amount of, any fines, penalties or further liabilities in connection with the investigation pursuant to which the subpoena was issued.”
The investigation is more bad news for Chipotle, which has yet to regain its financial footing following outbreaks of norovirus, E. coli O26 and Salmonella Newport that public health officials linked to the chain’s restaurants.
Chipotle’s comparable restaurant sales have been hard-hit by food safety woes.
In a Form 8-K filing with the SEC dated Dec. 4, the company said its comparable restaurant sales were retreating 16 percent at the onset of the month. The slide continued following a norovirus outbreak at a Chipotle restaurant in Brighton, Mass., that sickened 130 individuals, mostly students attending nearby Boston College.
“…comparable restaurant sales decreased to average minus 34 percent, and then recovered to minus 31 percent,” the company reported. “The week of Dec. 21, 2015, the US Centers for Disease Control and Prevention (CDC) announced that new illnesses related to the E. coli incident associated with Chipotle restaurants in October and November 2015 had slowed substantially, but also that it is investigating five new cases that were reported in November 2015 of the same strain of E. coli O26 but with a different DNA fingerprint.
“Following this announcement and related national media attention, our comparable restaurant sales trended down to minus 37 percent,” the company said. “For the full month of December, comparable restaurant sales were minus 30 percent. Future sales trends may be significantly influenced by further developments.”
The company’s stock tumbled more than 5 percent to $425.44 at 1:45 p.m. on Jan. 6 despite the company’s additional announcement of a share repurchase valued at $300 million minus commissions. “These authorized repurchases are in addition to $300 million in repurchase authorizations announced on Dec. 4, 2015, of which $116 million remained available as of Dec. 31, 2015,” Chipotle said in the SEC documents.
During the fourth quarter of 2015, Chipotle repurchased approximately 609,000 shares of stock at an average price of $556 per share. The company also repurchased approximately 401,000 shares of stock at an average price of $527 per share in December.