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Chipotle’s Co-CEO Admits He’s ‘Nervous’ About Turnaround

Chipotle Mexican Grill founder and CEO Steve Ells.Chipotle Mexican Grill founder and CEO Steve Ells.
Chipotle Mexican Grill founder and CEO Steve Ells.Stephen Brashear — AP

Chipotle Mexican Grill (CMG) customers are hardly flocking back to the burrito chain a year after its infamous E. Coli crisis.

The burrito chain’s stocks took a 6% dive in early trading Tuesday after co-CEO Steve Ells admitted at a Barclays conference he has concerns about Chipotle’s ability to recovery from the food safety disaster last year and hit ambitious 2017 sales goals in what has become a protracted sales decline.

The one time Wall Street darling’s same-store sales have plummeted for four straight quarters after E. coli outbreaks last year sickened dozens of customers 14 states- the drop was 21.9% in its most recent quarter, and the pace of decline has hardly abated. Ells said he was “nervous” about hitting the 2017 sales forecast Chipotle gave out in October. Lines are back at Chipotle, but Ells admitted that had more to do with worsening service than any big improvement in business.

The crisis landed the company in the crosshairs of billionaire activist investor Bill Ackman, whose Pershing Square Capital Management took at 9.9% stake in Chipotle in September, seeking multiple seats. Ells said Chipotle expects to make an announcement shortly about a new slate of board members. He acknowledged many had been on the board for a very long time and hinted Ackman could get a spot.

In addition to the sales collapse, discounting and a big marketing campaign have slammed Chipotle’s bottom line: adjusted earnings came in at 56 cents a share last quarter, well below analysts’ expectations for earnings of $1.56. That compares to $4.59 a share a year earlier. Chipotle has projected a high-single digit percentage same-store sales increase and earnings of $10 a share for 2017.

“Chipotle’s third-quarter earnings reinforces our thesis that the path to recovery remains slow and the brand has yet to regain credibility with the consumer. Therefore, we believe it’s too early to buy the stock, as same-store sales remain well below pre-incident [pre-E. coli] levels, despite aggressive promotions,” said Canaccord Genuity analyst Lynne Collier in a research note.