Ironic that my last post earlier today was about being “too clean.” Chipotle, the Mexican fast food chain seems to have no problem with being too clean. Its stock plunged nearly 8% today on reports of—yet another—norovirus scare at one of its stores in Virginia.
Let me say this (remember, you heard it here first…) if this problem spreads to other Chipotle outlets, this is the end of Chipotle.
A year and a half ago, I posted this original post about how Chipotle blew the first major crisis to hit their business. Unbelievably, they still haven’t rebounded. At its high, Chipotle stock was soaring at $725ish a share, after the food safety scare it plummeted to mid 200s per share. It’s never fully recovered. Neither have their stores. Outlets with lines out the door two years ago are all but empty today. The company made no significant effort to control the narrative in 2015, and they haven’t jumped in to crisis mode this time either. Chipotle made no significant effort to win back customer faith in their brand promise in 2015, and their stock price shows that lack of understanding between cooking, product, marketing, and branding. It’s that disconnect that cost Chipotle more than half their market capitalization in 2015, and this time around, they are left with 50% less than they had then.
For their sake, I hope they handle this crisis better than the last one. And for the time being, my money is with Jeff Gundlach (@truthgundlach) in short selling Chipotle stock (CMG) until this crisis either blows over or finally collapses the house of cards that has been propping Chipotle for the past 18 months.