On June 20, 2017, well-loved Mexican fast-food chain Chipotle Mexican Grill Inc.’s (NYSE:$CMG) shares dropped around 7% to $425.40. The reason for the decrease in price is largely due to the fact that the company has essentially told its investors that they’re struggling.
According to a Securities and Exchange Commission(SEC) filing on Monday, June 19, the company had met with some of its investors to reaffirm Chipotle’s expectations for 2017 which had been originally issued in a report back in April. This should already bring up some red flags for investors, even though Chipotle said at the June 19 meeting that it’s still expecting same-store sales to grow, to open up to 210 new locations, and to receive a full-year tax rate of 39%.
Same-store sales will likely not grow significantly — analysts at Factset believe that in 2017, Chipotle’s same-store sales would increase by only 10.3%. Chipotle has been struggling with its growth ever since the company was traced back to being responsible for foodborne illnesses that affected 60 customers in 14 states in 2015.
Additionally, according to the SEC filing, Chipotle expects food costs to take out around 34.2% of its total revenue, and that marketing and promotional costs will rise by 20 to 30 basis points. While marketing is good, the increased costs should give a hint on how hard Chipotle have been trying to get back from its 2015 incident.
The company’s second-quarter results are expected to be reported on July 20. Wall Street projects that they will have posted earnings of $2.44 a share on $1.2 billion in revenue. While the company isn’t doing too badly, investors should still keep watch of their stocks.
Featured Image: twitter
