Photo Credit: Brian Wilkins

Chipotle Mexican Group, Inc. (CMG) Consumer Discretionary - Hotels, Restaurants, & Leisure  | Reports October 25, After Market Closes

Chipotle is scheduled to report third quarter results tomorrow after the market closes. The burrito chain’s troubles have been well documented since its first health scare nearly one year ago. Since then, earnings and revenue have plummeted while share prices continue to edge down. The majority of this past year, and the quarter to be reported, CMG has been playing damage control and attempting to rebuild its reputation. Analysts aren’t convinced that a handful of marketing campaigns can make consumers forget about the numerous health scares, as expectations continue edge down ahead of the report.

Analysts at Estimize are calling for earnings per share of $1.66, 63% lower than a year earlier. That estimate has decreased 9% since Chipotle’s most recent report in July. Revenue for the period is estimated to drop 9% to $1.09 billion, marking a fourth consecutive quarter of negative top line growth. Shares are down over 40% since the first health scare broke and should continue to do so through tomorrow’s report. 

In the second quarter comparable restaurant sales decreased a 3.6% on a 16.6% decline in total revenue. In an effort to regain customers, Chipotle has hit the ground running with new promotional campaigns and marketing initiatives. Some of these include Chiptopia which rewards customers for frequent visits throughout the summer. More recently, the company launched free kid’s meals on Sundays and complimentary beverages for students.

These new marketing initiatives are not only expected to be unsuccessful but have also come at the cost of profitability. The costs associated with running campaigns to drive sales typically put pressure on margins. Meanwhile, a broader pullback is beginning in the fast casual space with popular names like Shake Shack starting to show weakness. Any external pressures will only compound Chipotle’s losses, as they struggle to win back customers.