Chipotle Sales Continue Downward on Food Borne Illnesses

Chipotle Mexican Grill Inc said its recently launched loyalty program helped improve comparable sales in July, sending its shares up 2.5 percent in extended trading despite a bigger-than-expected drop in quarterly comparable restaurant sales.

The restaurant chain has been giving away millions of free burritos and other menu items and doing things it had previously ruled out, such as introducing a loyalty program and new menu items, to win back customers after its sales were battered following outbreaks of E. coli, salmonella and norovirus.

"While it has only been a few weeks since Chiptopia (loyalty program) launched, we are pleased to see that July sales comp trends have already improved by 200 to 300 basis points, and transaction comp trends have improved by an even greater amount," said co-CEO Steve Ells.

Chipotle's net income slumped to $25.6 million, or 87 cents per share, in the second quarter ended June 30, from $140.2 million, or $4.45 per share, a year earlier.

Sales at restaurants open at least 13 months fell 23.6 percent, more than the 20.6 percent drop expected on average by analysts polled by research firm Consensus Metrix.

Revenue fell 16.6 percent to $998.4 million, down for the third straight quarter.

Analysts on average had expected earnings of 93 cents per share on revenue of $1.05 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Sruthi Ramakrishnan in Bengaluru and Lisa Baertlein in Los Angeles; Editing by Saumyadeb Chakrabarty and Don Sebastian)