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Chipotle says California probe widens into national investigation
February 2, 2016 / 9:37 PM / 2 years ago

Chipotle says California probe widens into national investigation

A logo of Chipotle Mexican Grill is seen on a store entrance in Manhattan, New York November 23, 2015. REUTERS/Andrew Kelly

(Reuters) - Chipotle Mexican Grill Inc (CMG.N) said a federal criminal probe linked to a food-safety incident at a California restaurant had widened into a national investigation, sending its shares down 7 percent in extended trading on Tuesday.

The burrito chain also said sales at established restaurants plunged about 36 percent in January, adding to a 14.6 percent drop in the fourth quarter, its first ever decline in its 10-year existence as a public company.

Chipotle said it expected to break even in the current quarter on a per-share basis as it spends heavily on beefing up food safety at its outlets. Analysts on average were expecting a profit of $2.07 per share, according to Thomson Reuters I/B/E/S.

Chipotle received a new subpoena at the end of January, seeking information related to company-wide food safety matters dating back to Jan. 1, 2013 and superseding an earlier subpoena that was limited to just one restaurant in Simi Valley.

The expanded investigation could focus on what managers at Chipotle’s headquarters knew about the conditions at restaurants around the country and when, said Bill Marler, an attorney representing the company’s customers.

Chipotle said it intended to fully cooperate in the investigation by the U.S. Attorney’s office for the Central District of California.

More than 50 people across 14 U.S. states fell sick in two E.coli outbreaks last year after eating at Chipotle’s outlets. Norovirus outbreaks were also reported in Massachusetts and California.

The outbreaks have driven away customers, wiped more than a quarter off the company’s stock price and resulted in a shareholder lawsuit.

“In addition to keeping the story in the media, this could also damage future earnings if a settlement is reached or compensation is granted,” said Neil Saunders, the CEO of research firm Conlumino.

The U.S. Centers for Disease Control and Prevention, however, said on Monday that the E.coli outbreaks linked to Chipotle appeared to be over.

The company’s net income plunged 44 percent to $67.9 million, or $2.17 per share, in the quarter ended Dec. 31.

Revenue declined 6.8 percent to $997.5 million.

“The fourth quarter of 2015 was the most challenging period in Chipotle’s history,” co-Chief Executive Steve Ells said in a statement.

Chipotle’s shares, which surged to an all-time high of $758.61 in August last year from an initial offering price of $22 in 2006, were trading at $442 after the bell.

Reporting by Subrat Patnaik, Siddharth Cavale in Bengaluru and Tom Polansek in Chicago; Editing by Kirti Pandey

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