Chipotle says employee worked while ill at Va. location

Chipotle says it believes an employee was working while sick at a Virginia location where dozens of customers reported becoming ill earlier this month with what health officials think was norovirus.

After the company reported improved sales for the second quarter Tuesday, CEO Steve Ells said that a company investigation into the illnesses found that its leadership at the store didn't adhere to its protocols.

"We believe someone was working while sick," Ells said, without giving specifics.

Given "how quickly symptoms develop with norovirus and the large number of folks involved, we will likely not be able to determine whether a patron or employee was the first to introduce the virus to the facility," said David Goodfriend, director of the Loudoun County Health Department.

A Chipotle representative noted that employees are not supposed to work when ill, and the company offers paid sick days for hourly employees. Ells said the company is adding training to what he called "excellent" protocols to prevent further norovirus cases.

Chipotle's image has been vulnerable as it tries to reassure customers its food is safe since an E. coli outbreak in fall 2015, which was followed by a norovirus outbreak at a single restaurant that same year. Norovirus is a leading cause of illnesses from contaminated food, and infected employees are a frequent source of outbreaks.

The Denver-based chain has been making progress in winning back customers, and said sales rose 8 percent during the second quarter, following a 24 percent decline in the year-ago period.

But the most recent figure doesn't reflect any potential fallout from the reported illnesses in Sterling, Virginia. At another location in Dallas, the company blamed a structural gap for mice falling from the ceiling.

Chipotle said those events have dampened its recovery efforts in recent days, but that it did not know what the long term impact might be. It stood by its guidance for sales at established location to rise in the "high single digit" percentages for the year. For all of last year, the sales figure declined 20 percent.

Larry Chiagouris, a professor of marketing at Pace University, noted that the chain will be closely watched and held accountable for any mistakes.

"If somebody gets sick after eating at a Chipotle, they're going to be more likely to think it's Chipotle," he said.

Chipotle itself has noted its tough predicament, saying the social media attention has amplified awareness of its food scares compared with past incidents at other chains.

Still, the company is hoping that buzz around a potential national launch of queso will tempt customers as it tries to move past the food scares. Executives repeatedly mentioned the cheese dip during a conference call Tuesday, and said excitement around the item might change the narrative following last week's bad publicity.

"We're talking a lot about this one particular menu item, but you shouldn't underestimate how much potential it has," said Mark Crumpacker, who heads Chipotle's marketing.

For the quarter, the company said it earned $66.7 million, or $2.32 per share. That was more than the $2.16 per share analysts expected, according to Zacks Investment Research. Chipotle noted that its restaurant level operating margin during the period improved, driven by more efficient scheduling of employees.

Total revenue was $1.17 billion. Analysts expected $1.18 billion.

Chipotle shares have dropped roughly 8 percent since the beginning of the year, while the Standard & Poor's 500 index has risen 11 percent. In the final minutes of trading on Tuesday, shares hit $348.40, a decline of 21 percent in the last 12 months. They rose 1.2 percent in extended trading.

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This story was generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on CMG at https://www.zacks.com/ap/CMG

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Keywords: Chipotle Mexican Grill, Earnings Report