After facing a major ecoli crisis and instituting new food safety protocols has hurt Chipotle’s bottom line and image. Along with the food safety crisis, Chipotle’s attempts at winning back customers through free food has cost the company millions. Chipotle is expected to announce its first loss ever, nearly $30 million.
Chipotle will have lost three years of earnings between fiscal year 2014 and fiscal year 2017 after suffering through multiple food-related illness outbreaks since last year. In response to the loss, Chipotle CEO Steve Ells said: “the fourth quarter of 2015 was the most challenging period in the company’s history.”
Chipotle has upped its marketing spending to draw customers back to stores, offering buy one, get one free deals and other giveaways.J.P. Morgan forecasts a 15% decline in sales at stores open at least a year. Chipotle spokesman Chris Arnold did not address a request for comment regarding J.P. Morgan’s note specifically, but said the company will issue an update on its recovery when it reports first quarter earnings.
After closing all of its stores for four hours in February to reassess safety protocols, Chipotle offered one free entree to all customers. The J.P. Morgan report shows the online coupon for this free entree was claimed 5.3 million times, but only 67% of the coupons were actually redeemed in store. During the period in which the offer was valid, these redemptions made up an estimated 4.1% of all transactions.
Chipotle is currently running two promotions. One of them gives customers a free Izze drink and an entree with the purchase of an entree. Chipotle has also mailed offers directly to customers. Between 20% and 30% of these coupons have been redeemed, according to the report. Chipotle stock has fallen from an all-time high of $758 a share to $456. The chain’s co-executives have also been impacted by the outbreaks. CEOs Steve Ells and Monty Moran each brought in around $13.5 million — down roughly half from the previous year.