Shares of Chipotle Mexican Grill, Inc. (NYSE: CMG) were unraveling last month after the burrito roller issued a warning on its second-quarter performance. According to data from S&P Global Market Intelligence, the stock lost 13% last month.
As you can see from the chart below, the bulk of that decline came on June 20 when that warning came out.
The burrito chain said in an 8-K filing that it was meeting with a group of investors and reaffirming guidance for the quarter and the year. It said food costs for the current quarter were expected to be 34.2%, and that marketing costs were expected to be 20-30 basis points higher than in the first quarter, or the equivalent of 3.6-3.7% of sales. As a result, management said that operating costs as a percentage of revenue could be slightly higher than in the first quarter.
The company also said it continued to project high-single-digit comparable sales growth for the year and 195-210 restaurant openings.
Those weren't bad numbers, but the market was clearly disappointed as shares fell 7% that day. Investors seemed to interpret the update as confirmation that Chipotle's turnaround was going more slowly than expected and that increased marketing costs and higher prices in some markets were not leading to an improvement in same-store sales.
Chipotle has put the challenges of the E. coli crisis behind it, but the burrito chain is still not back at full strength. Customers aren't visiting as frequently, CEO Steve Ells said operations in many stores were unsatisfactory, and the company experienced a credit card security breach earlier this spring.
We'll learn more when Chipotle reports earnings at the end of the month, but the window for a strong turnaround is closing with each passing month.
10 stocks we like better than Chipotle Mexican GrillWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Chipotle Mexican Grill wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of July 6, 2017