Many people thought that it was a wrap for Chipotle (CMG) after the company was hit with a one-two punch of food-borne illness outbreaks late last year.
But things were looking up again. According to a Williams Blair report earlier this month, consumer sentiment for the company had been slowly but steadily improving. That was matched by improving investor sentiment: the company's stock has also steadily risen 6.2% in 2016.
Those gains may be in jeopardy, however, after the company revealed that it had to close a store in Billerica, Massachusetts after an employee was confirmed to have contracted the norovirus.
The timing couldn't be worse for the fast food company.
William Blair had been conducting a survey since November of 800 adults following the initial outbreak. Their research indicated that consumer sentiment concerning Chipotle bottomed in January, when 80% of respondents were aware of the problems the company was having vs. 50% in early November.
However, the eating habits of the respondents didn't change much over the duration of the survey period. If 43% of respondents in January said that they had changed their eating patterns in response to the outbreak, that number fell slightly to 40% by March.
Of the nearly 350 respondents that said they changed their eating patterns, 78% said in January that they would never eat at Chipotle again. By March, that number fell to 70%.
It's a pattern that Real Money's Jim Cramer picked up on when he said, "Take it from me as a restaurateur, as the "C" letters come down from the windows in New York City and the rest of the country puts e. coli in the rearview mirror, the same-store sales are going to come roaring back. The company's average price for stock isn't that much below here."
Read about Jim Cramer's 5 restaurants with game
Indeed, just a cursory view of local Chipotle restaurants over the past few weeks has revealed that the familiar lunch-time lines snaking out the door are starting to return. Still, the company's first quarter slowdown definitely affected its bottom line.
Wall Street has a consensus expectation for the company's first quarter same store sales to decline 25% in the quarter, implying a 20% decline for February and March.
On Monday, analysts at Credit Suisse lowered their first quarter same store sales forecast to a 30% decline, saying that there is a real risk of the company giving back some of its recent gains. This analysis was before the company's most recent norovirus announcement.
Credit Suisse expects Chipotle to provide a first quarter sales update within the next two weeks. They are lowering estimates ahead of that release, because "aggressive promotional efforts have likely helped traffic in recent weeks, but have come at the expense of "real" sales."
Real Money contributor Brian Sozzi reported today that the company has spent an incredible $50 million in advertising in the first quarter alone to combat negative sentiment.
Whether those advertising dollars will pay off in the long run remains to be seen. In the short-run, however, Chipotle can't seem to get out of its own way.
