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Chipotle Mexican Grill (CMG) said it has received a new subpoena this month related to previous food-related illness, overshadowing solid first quarter results. The chipotle stock fell on Thursday.
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The disclosure could scare off some investors who had hoped the company's food security problems were behind them.
In a statement filed Thursday with the SEC, the restaurant said it received the subpoena on April 18. This summons, said Chipotle, asked for information about cases of restaurant-related illnesses in Los Angeles, Boston, Simi Valley, California and Sterling, Va that were covered by previous assignments. The new subpoena also covered a restaurant in Powell, Ohio.
"It is not possible at this time to determine whether we will incur any fines or penalties in the course of the investigation under which the subpoenas were issued or make a reasonable estimate of their amount, "said the company.
Chipotle received a subpoena to appear before the federal grand jury in January 2016, related to a criminal investigation conducted by the US Attorney's Office in the Central District of California and jointly with the FDA. He also received subpoenas in July 2017 and February 2018.
The company said it would cooperate fully with the investigation.
Chipotle stock
The stock of chipotle fell 4.5% to 678.01 currently on the stock market, but found support at its 50-day average. The stock IBD Leaderboard has a composite rating of 93 out of a maximum of 99. The relative strength of the stock has gradually faded, after a long-term rise.
The chipotle stock had almost reached its level a few days earlier, before a big food-related illness alert starting in late 2015 hurt the company's sales and profits. Investors' hopes were reinforced by a new CEO, a resumption of sales trends, digital orders, marketing efforts and the new loyalty program of the Mexican casual-casual chain.
Chipotle Earnings
Late Wednesday, Chipotle announced solid first quarter results and raised its 2019 forecast for store sales growth.
EPS rose 60 percent to US $ 3.40, exceeding estimates of US $ 3, while revenues grew 14 percent to US $ 1.31 billion, compared with consensus of US $ 1.27 billion. Digital sales more than doubled, accounting for 15.7% of sales for the quarter, up from 12.9% in the fourth quarter. Same-store sales jumped 9.9%, easily outpacing Consensus Metrix's 7.3% gain.
Restaurant operating margins increased to 21% from 19.5% a year ago, but salary, promotional and delivery costs increased. General and administrative expenses jumped 33% to $ 102.7 million, or 7.8% of revenue, from 6.7%, due to higher performance fees, digitization restaurant modernization and restructuring.
Management now sees comparable store sales growth in the range of 1% to 2%, up from previous growth.
"This is the fifth consecutive quarter of acceleration of the compositions, which reinforces us in our belief that when we communicate with customers through a culturally relevant, taste-oriented marketing and the real ingredients of Chipotle, and offering more convenient access with less friction, they respond with enthusiasm "Brian Niccol.
Other restaurant stocks
Elsewhere among restaurant stocks, Domino's Pizza (DPZ) yielded 2.8% after surging 7% Wednesday on first quarter results. Profits were up, but revenue and store sales were lower than Consensus Metrix forecasts. But some analysts said they believe Domino's same-store sales in the domestic market are better than the lower expectations of many investors.
Meanwhile, Taco Bell parent Yum brands (YUM) increased by 0.2% and El Pollo Loco (LOCO) plunged 0.8%. Del Taco (TACO) lost 0.6%.
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