* Annual reports convey immigration enforcement risks
* Analysts expected to query Chipotle in earnings call
By Lisa Baertlein and Mary Milliken
LOS ANGELES, Feb 9 Chipotle Mexican Grill Inc
(CMG.N), in the midst of a widening federal crackdown on its
its undocumented work force, warned investors a year ago that
it was subject to immigration audits and that it may be
employing workers in the country illegally.
In what may prove to be a prescient statement, the Wall
Street darling also said in its 2009 annual report that the
discovery of a large number of of unauthorized workers could
disrupt operations and harm financial performance.
"We have been subject to audits by immigration authorities
from time to time," the high-flying burrito chain said in its
2009 annual report filed in February 2010.
The company was not immediately available for comment on
Chipotle reports fourth-quarter earnings on Thursday and
analysts said there may be questions about the impact of the
ongoing probe by U.S. Immigration and Customs Enforcement,
known as ICE.
So far, Chipotle has been forced to fire hundreds of its
1,200 employees in Minnesota and the company told Reuters last
Friday that a federal immigration probe has widened to Virginia
and Washington, DC. [ID:nN04224441]
Chipotle's share price has jumped from under $40 to around
$250 in just over two years as investors bet on big expansion
plans and a business model built around its motto "Food with
RISK LEVEL 'TICKED UP'
The richly valued stock faces pressure from rising food
costs and now immigration concerns are creeping into analysts'
"At this point, the risk level for the stock may have
ticked up to some extent, as the company has received notices
of inspection from ICE ... for its units in Minnesota,
Washington DC, and part or all of Virginia," Janney Capital
Markets analyst Mark Kalinowski said in a client note on
He still has a buy recommendation on Chipotle, however.
While changes to immigration policy are putting the
restaurant industry in the spotlight due to its reliance on
immigrant labor [ID:nN07587199], Chipotle's disclosures suggest
it was more attuned to the risk in past years than its key
A Reuters review of Chipotle's recent annual reports and
those of other major publicly traded restaurants found that the
Denver-based Chipotle went to greater lengths to outline
While rivals like McDonald's Corp (MCD.N), Starbucks Corp
(SBUX.O) and fast-growing Panera Bread Co (PNRA.O) flagged
potential regulatory risks in general terms, Chipotle has
addressed immigration specifically with boiler plate comment.
Among other things, Chipotle's comments include: "Although
we require all workers to provide us with government-specified
documentation evidencing their employment eligibility, some of
our employees may, without our knowledge, be unauthorized
Shares in Chipotle were up 3.3 percent, or $8.20, to
$255.46 in midday trading.
(Editing by Dave Zimmerman)