The burrito chain, Chipotle Mexican Grill (CMG - Analyst Report) has rolled out its newest addition to the menu – chorizo – to its restaurants nationwide.
The dish, which is a mix of spicy chicken and pork sausage, was previously released in Jun 2016 to five test markets, where it received an overwhelming response.
The nationwide launch of chorizo is an attempt by the company to lure customers back to its stores, after the outbreak of a series of food borne illnesses. This outbreak severely marred traffic in first-quarter 2016, causing same-store sales to plunge nearly 30%.
The launch of chorizo in select stores in the second quarter boosted traffic and returned the company to profitability after it posted loss in the first quarter. Thus, the nationwide rollout is expected to boost sales even further in the upcoming quarter.
The company’s temporary loyalty program Chiptopia, which ran from July to September, also helped improve sales by 200 to 300 basis points in July itself by attracting more than 3.6 million participants. This added to various other promotional initiatives undertaken by the company to augment sales and loyalty among customers.
However, the company had earlier withdrawn its 2016 comps outlook due to extremely volatile sales trends post the outbreak.
Moreover, the company’s margins are likely to remain under pressure due to high labor expenses and costs associated with a number of marketing and promotional activities likely to be undertaken by the company.
CHIPOTLE MEXICN Price
Nonetheless, we expect focus on improving food standards, and efforts to maintain market position through menu innovation and technology driven initiatives, to aid in turning around the fate of this Zacks Rank #4 (Sell) company.
Stocks to Consider
Better-ranked stocks in the same sector include Wingstop, Inc. (WING - Snapshot Report) , Carrols Restaurant Group, Inc. (TAST - Snapshot Report) and Jack in the Box, Inc. (JACK - Analyst Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wingstop has received seven upward revisions over the last 60 days. It beat estimates in each of the trailing four quarters with an average positive earnings surprise of 15.46%
Carrols has recorded an average positive earnings surprise of 221.67% over the past four quarters, with a beat in each. Additionally, its growth estimate for the full year 2016 is pegged at 55.3% compared with the industry average of 7.1%
Jack in the Box has received ten upward revisions over the last 60 days. Also, its growth estimate for the full year is at 24.1% compared with the industry average of 7.1%.
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