Chipotle Mexican Grill Inc.’s same-store sales have begun to recover but were still down 26.1 percent in February, the company said in a late filing Tuesday.
The Denver-based chain also confirmed that it has hired Kansas State University meat-science professor James Marsden as its new executive director of food safety.
Calling him one of the nation’s foremost authorities on food safety, Marsden “is actively working to further our food safety efforts and continue the progress we have already made towards establishing Chipotle as a leader in food safety,” the company said in a filing with the Securities and Exchange Commission.
Chipotle released its same-store sales trends in advance of an update company officials are scheduled to give at the Bank of America Merrill Lynch 2016 Consumer and Retail Tech Conference on Wednesday.
The February trend was a marked improvement over the same-store sales decline of 36.4 percent in January, after the chain suffered through six months of multiple foodborne illness outbreaks scattered across the country.
Company officials said Leap Day added an estimated 2.6 percent to the February comparable sales trends, and during the last two weeks of the month, same-store sales improved to a decrease of 24.7 percent. That’s compared to the first two weeks of the month, when comparable sales were down 33.8 percent.
On Feb. 8, the chain began an aggressive marketing campaign that included the offer of a free burrito, bowl or salad.
For the week ended March 7, same-store sales improved further to negative 21.5 percent.
But last week news of a restaurant closing temporarily in Massachusetts because of ill workers likely had an impact: same-store sales dipped to 27.3 percent that week. News reports claimed the workers were ill with norovirus, but NRN was unable to confirm this.
Chipotle officials noted that the restaurant closure was the result of restaurant teams following the chain’s new food-safety protocols. The restaurant reopened quickly and there were no reports of related-customer illness.
Chipotle reiterated that sales trends would fully recover over time, though food costs will be about 2 percent higher due to food-safety related actions the chain has taken.
During the first quarter, the company projected that restaurant-level operating margins would be in the mid-single digit range. The company also projected earnings per share loss of $1 per share or worse.
Higher costs include the increase in marketing spending, the cost of new food-safety protocols now in place, as well as higher food waste costs, rejection rates related to the stricter testing of produce, and higher labor costs with the burrito giveaway.
The company said it also incurred an increase in legal expenses associated with a federal investigation in the chain’s response to the foodborne illness outbreaks.
Last year, Chipotle brought in food-safety consultants IEH Laboratories and Consulting Group, headed by Mansour Samadpour. It’s not clear how Marsden’s appointment will impact that deal.
Marsden is a specialist in the safety of meat products, including the control of E. coli 0157 in raw ground beef.
He served previously as a faculty member at Kansas State’s Animal Science and Industry Department as the Regent’s Distinguished Professor of Food Safety and Security. He also served as the associate director of the National Agriculture Biosecurity Center at KSU.
According to the university’s web page for Marsden, he also serves as senior science advisor for the North American Meat Science Association and does food safety training for the meat industry.
Marsden is also the father of actor James Marsden.