Can Chipotle Recover From the Latest Health Scare and Return to Growth?

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Published: March 11, 2016 8:15 am

Last Updated: January 13, 2020 12:04 pm

Chipotle Mexican Grill Inc. (NYSE: CMG) had a rough final quarter of 2015, dogged by a flurry of health scares. The company has fallen from October highs around $759 a share to January 2016 lows of just over $400 – a 47% decline across the period. Over the succeeding months though, the high-end fast-food retailer has staged something of a recovery. From the lows it has picked up 40% to trade back over $530 a share.

That is, until this week. On March 8, news broke that the company had closed a Boston area store on the back of one confirmed case, and perhaps a few suspected cases, of employees picking up norovirus.

It’s obviously not a great time to be a Chipotle shareholder, being beaten down by successive health scares that have ravaged the stock. Going forward, however, the question is whether Chipotle can stage a recovery again, or is this latest outbreak too much for investors to bear?

It would be easy to jump to the worst case scenario and assume the latter. Chipotle has built its brand based on a reputation for quality ingredients and healthy food. Repeated health scares are quickly tarnishing this reputation, and for a company like Chipotle to command the premium prices it does, public perception of its brand must be maintained.