CMG - Chipotle

[TorontoRaptorsFan]

The Chipotles I go to constantly have lineups at lunch time through the door.

I've always said I prefer to purchase shares below $400 so we're at that price point now.

The fact that Ackman has promised not to meddle in affairs for a couple of years was a good sign that he was comfortable with the direction the company was heading into.

There's definitely a lot more competition. I would have preferred if they focused more on Chipotle and Pizzeria Locale. I feel they got sidetracked with Tasty Made. There's still only one location. If they feel a need to delve into the burger business they should purchase a competitor whose values align with their own (Burger Lounge would be a good choice).

[educatedidiot]

The data point I always go back to is in 2015 they did $900M of EBITDA with ~2000 ending stores. By the end of this year they should be just under 2500 stores. So with 25% more stores, getting back to a similar EBITDA level doesn't seem like a huge stretch.

 

I'm not sure if they'll ever get back to those peak 2014-2015 productivity levels of $450k in EBITDA per store, but even if they only got back to the $350k per store they did in 2011 that's still ~$875 million in EBITDA.  You can see the year by year store economics here: http://www.rocketfinancial.com/Financials.aspx?fID=2408&p=2&pw=79422&rID=10

[Spekulatius]

CMG'S niche of " healthy" fast mexican food has gotten more crowded. There are at least 2 competing chains with similar fare in my area and at least one of them has a superior offering to Chipotle.

[DTEJD1997]

Hey all:

 

There are reports now of another mass food poisoning incident at a Chipolte in VA.  Stock is down 6%+.

 

It just hit me that MAYBE this needs to trade at a DISCOUNT to the market and not a premium.

 

There is a TON of competition now, some of it is pretty good.

 

How many times have they had problems with food safety?  Is this the 4th time?  I seriously don't know, but it is MULTIPLE times.

 

 

 

[fareastwarriors]

Chipotle Drops After Outbreak Forces It to Close Restaurant

 

https://www.bloomberg.com/news/articles/2017-07-18/chipotle-declines-after-outbreak-forces-it-to-close-restaurant

[AzCactus]

CMG'S niche of " healthy" fast mexican food has gotten more crowded. There are at least 2 competing chains with similar fare in my area and at least one of them has a superior offering to Chipotle.

 

I'm not directly making a comparison here but I think there is room for more than one company to be successful.  Pizza-Dominoes, Pizza Hut etc. Burgers-McDonalds, Burger King etc.  I think what you mention may slow down their growth rate but it doesn't altogether mean investing is a bad idea. 

[aceskc]

Either this article was previously prepared or business insider has the fastest researech/publication speed amongst its peers...

 

http://www.businessinsider.com/where-to-eat-instead-of-chipotle-2017-7

[AzCactus]

Competition definitely exists but that doesn't mean there isn't room for two companies in the same marketplace. 

[TwoCitiesCapital]

Hey all:

 

There are reports now of another mass food poisoning incident at a Chipolte in VA.  Stock is down 6%+.

 

It just hit me that MAYBE this needs to trade at a DISCOUNT to the market and not a premium.

 

There is a TON of competition now, some of it is pretty good.

 

How many times have they had problems with food safety?  Is this the 4th time?  I seriously don't know, but it is MULTIPLE times.

 

20M people a year get Norovirus and clearly not all of them are getting it from Chipotle. Where are the news stories on all of the other chains where this happens?

 

The market is just overly sensitive to negative news on Chipotle given that it's pristine image was shattered by the initial scare.

[cmlber]

20M people a year get Norovirus and clearly not all of them are getting it from Chipotle. Where are the news stories on all of the other chains where this happens?

 

The market is just overly sensitive to negative news on Chipotle given that it's pristine image was shattered by the initial scare.

 

I think you're overly discounting the impact on the business here.  Because Chipotle is so high profile, and has had one of these scares before and is known for it's natural ingredients, every time there is a food borne illness it's going to get front page press, and the more front page press it gets, the more likely it is future instances will get front page press.  Your statement is 100% correct, Chipotle is probably 100x safer to eat at than any mom & pop restaurant, but nobody is going to click the link on CNN that says "Local Chinese restaurant in Virginia has a case of norovirus," so nobody will ever hear about it.  I remember eating with a friend after the initial e. coli outbreak, I suggested we go to Chipotle and he refused.  We ended up going to a sushi restaurant for lunch that was probably 100x more likely to give us a food borne illness.  Most people just read the headlines and don't consider the probabilities of this stuff happening relative to every other restaurant that doesn't get press, and that is a material headwind for the business as it creates a perception of heightened risk of eating at Chipotle, even if the perception is wrong.

[TwoCitiesCapital]

20M people a year get Norovirus and clearly not all of them are getting it from Chipotle. Where are the news stories on all of the other chains where this happens?

 

The market is just overly sensitive to negative news on Chipotle given that it's pristine image was shattered by the initial scare.

 

I think you're overly discounting the impact on the business here.  Because Chipotle is so high profile, and has had one of these scares before and is known for it's natural ingredients, every time there is a food borne illness it's going to get front page press, and the more front page press it gets, the more likely it is future instances will get front page press.  Your statement is 100% correct, Chipotle is probably 100x safer to eat at than any mom & pop restaurant, but nobody is going to click the link on CNN that says "Local Chinese restaurant in Virginia has a case of norovirus," so nobody will ever hear about it.  I remember eating with a friend after the initial e. coli outbreak, I suggested we go to Chipotle and he refused.  We ended up going to a sushi restaurant for lunch that was probably 100x more likely to give us a food borne illness.  Most people just read the headlines and don't consider the probabilities of this stuff happening relative to every other restaurant that doesn't get press, and that is a material headwind for the business as it creates a perception of heightened risk of eating at Chipotle, even if the perception is wrong.

 

No doubt - though I don't think that it's lasting. Does it impact real foot traffic now? Yes.

 

Will it impact foot traffic over the next 12-24 months? Maybe. 

 

Does it permanently tarnish the brand for a large group of people? I'm less certain and more skeptical of "this is the end" of Chipotle.

 

 

[Guest roark33]

I also think it is funny when people compare CMG to taco bell in terms of health safety.  My friends used to stop by Taco Bell every night after drinking a ton.  They were probably all sick the next day, who knows if it was from the drinking or Taco Bell....

[AzCactus]

I think in some unique way this is a complement to Chipotle.  The fact that people in Sterling got sick is bad and obviously it's imperative that this not happen in the future.  With that said, if people didn't have high expectations for Chipotle this would be a minor deal.  Long term, I think people like Chipotle for their speed, price and the ability to put together a healthy meal. 

[cmlber]

No doubt - though I don't think that it's lasting. Does it impact real foot traffic now? Yes.

 

Will it impact foot traffic over the next 12-24 months? Maybe. 

 

Does it permanently tarnish the brand for a large group of people? I'm less certain and more skeptical of "this is the end" of Chipotle.

 

I'm sure most of it is temporary, if there are no other headlines.  But EVERY time anybody gets sick after eating at a Chipotle from now on, it's going to be a headline.  And prior to the E. coli issue, when people left Chipotle with a stomach ache, they probably just assumed it was a stomach ache.  Now they're going to wonder if they have a food borne illness and are probably much more likely to go to a doctor if they have any symptoms that would have just gone away naturally in the past.  So you have 1) people more likely to recognize and report food borne illness than in the past and 2) 100% chance that any incident, no matter how minor, makes front page news nationwide.  That may be permanent...  We'll see...

 

Either way, there is so much competition in the fast casual space that didn't exist 5-10 years ago.

[DTEJD1997]

Hey all:

 

There are reports now of another mass food poisoning incident at a Chipolte in VA.  Stock is down 6%+.

 

It just hit me that MAYBE this needs to trade at a DISCOUNT to the market and not a premium.

 

There is a TON of competition now, some of it is pretty good.

 

How many times have they had problems with food safety?  Is this the 4th time?  I seriously don't know, but it is MULTIPLE times.

 

20M people a year get Norovirus and clearly not all of them are getting it from Chipotle. Where are the news stories on all of the other chains where this happens?

 

The market is just overly sensitive to negative news on Chipotle given that it's pristine image was shattered by the initial scare.

 

You've got a poin that perhaps Chipotle gets more press than other chains.  I would counter that IF 20M a year get Norovirus, I doubt that many are getting it from restaurants.  I would suggest a lot of them are getting from home prepared meals or perhaps co-workers. 

 

I eat out a LOT and it is pretty rare that I get anything worse than an upset stomach (and that is rare).  The last serious case of food poisoning was a meal prepared by my ex-girlfriend.  The meal in question had nothing to do with her becoming an EX though.

 

HOWEVER, Chipotle should be on "double alert" because of their past problems AND management has got to know that if there are future problems, the press is going to pounce on it.

[johnny]

 

I think you're overly discounting the impact on the business here.  Because Chipotle is so high profile, and has had one of these scares before and is known for it's natural ingredients, every time there is a food borne illness it's going to get front page press, and the more front page press it gets, the more likely it is future instances will get front page press.

 

100% correct. Chipotle benefit(s/ed) from the vague association most customers had with the brand and things like "all-natural" "GMO-free" "healthy". Since all of those pitches got conflated into an amorphous feels-blob, anything that undermines one of them is a big problem for the brand.

 

It's not fair, but to expect anything but intense media scrutiny on this stuff (and overblown customer response) is not being realistic.

[JayGatsby]

Frustrating, but even it's a big nothing burger the media will keep reporting these events. Based on some quick googling these things (and worse) seem to happen to all chains, but they aren't widely reported. Seems unlikely that these events will stop happening so seems like it likely does negatively impact traffic a bit over time.

[kab60]

I'm actually surprised the market didn't react more negatively. It's definitely bad for the brand. Even though it might be a bit unfair, perception is important, and obviously they'll get hit harder due to their own holier-than-thou kinda branding. I believe these issues will pass with time, but I think the valuation still suggest most people agree with that.

[AzCactus]

I admit I am oversimplifying but the only thing that matters medium to long term is do these issues stop happening in the future and ultimately what do people think of the Chipotle brand.  If you talk about food that can be relatively healthy, is pretty affordable and raised with care (kinda) and Chipotle comes to mind this will be a decent long term holding. Ultimately, if you go to McDonald's there are some items that are comparable to Chipotle in price.... Micky D's is not as cheap as it appears

[rkbabang]

I admit I am oversimplifying but the only thing that matters medium to long term is do these issues stop happening in the future and ultimately what do people think of the Chipotle brand.  If you talk about food that can be relatively healthy, is pretty affordable and raised with care (kinda) and Chipotle comes to mind this will be a decent long term holding. Ultimately, if you go to McDonald's there are some items that are comparable to Chipotle in price.... Micky D's is not as cheap as it appears

 

Yes but eating at MD's can be cheap, but Chipotle is never cheap.  I can go to MD's and order 3 McDoubles and a medium iced coffee for under $5.  You can't eat and drink at CMG for under $5 even if you wanted to.

 

[AzCactus]

Very true you can get it for cheap.  However, that would also give you 1140 calories, 81% of your total fat intake, 33% of carbs, 123% of your saturated fat, 69% of cholesterol and 105% of sodium.  That's before including the coffee lol.

 

 

[glorysk87]

I admit I am oversimplifying but the only thing that matters medium to long term is do these issues stop happening in the future and ultimately what do people think of the Chipotle brand.  If you talk about food that can be relatively healthy, is pretty affordable and raised with care (kinda) and Chipotle comes to mind this will be a decent long term holding. Ultimately, if you go to McDonald's there are some items that are comparable to Chipotle in price.... Micky D's is not as cheap as it appears

 

Yes but eating at MD's can be cheap, but Chipotle is never cheap.  I can go to MD's and order 3 McDoubles and a medium iced coffee for under $5.  You can't eat and drink at CMG for under $5 even if you wanted to.

 

To be fair, to eat at McDonald's and feel even remotely full I have to order 3 double cheeseburgers at a MINIMUM...

[oddballstocks]

I admit I am oversimplifying but the only thing that matters medium to long term is do these issues stop happening in the future and ultimately what do people think of the Chipotle brand.  If you talk about food that can be relatively healthy, is pretty affordable and raised with care (kinda) and Chipotle comes to mind this will be a decent long term holding. Ultimately, if you go to McDonald's there are some items that are comparable to Chipotle in price.... Micky D's is not as cheap as it appears

 

Yes but eating at MD's can be cheap, but Chipotle is never cheap.  I can go to MD's and order 3 McDoubles and a medium iced coffee for under $5.  You can't eat and drink at CMG for under $5 even if you wanted to.

 

To be fair, to eat at McDonald's and feel even remotely full I have to order 3 double cheeseburgers at a MINIMUM...

 

Whoa!! Are you my 7yr old son?  That's what he needs to be full, but kids are growing and eat a ton. 

 

On a recent road trip we ate at McDonalds a fair amount.  They have a good salad, McNuggets are good, it's dirt cheap, esp for a big family.  When given the choice I prefer McDonalds and Burger King to Wendy's, even though Wendy's has better choices.

 

To Chipotle.  I get that everyone on here is smart and enlightened etc.  But if a case like this hits the news my wife and none of our friends will touch the place.  There was a single Chipotle near us that was constantly packed, they built two more to spread out the crowds.  There are zero crowds, zero traffic, places are universally dead now.  This is an upscale suburban area where other restaurants are filled with long waits.  Even fast food has long waits.

 

Check out iwaspoisoned.com, fascinating data points.  I'd say 90% of the entries I saw were Chipotle and Taco Bell.  Not surprised at Taco Bell at all.  I have had some unpleasant experiences there years ago.  They aren't a bastion of health and food safety.  When I think of dirty fast food places I think: Taco Bell, Pizza Hut, and KFC.  I absolutely refuse to eat at KFC due to how disgusting the one near me was growing up.

[BRK7]

Check out iwaspoisoned.com, fascinating data points.  I'd say 90% of the entries I saw were Chipotle and Taco Bell. 

 

How reliable are the postings to iwaspoisoned.com ? 

 

CMG has approx 12% of its shares sold short.  Call me a diehard cynic, but when there's a decent-sized short interest in a high-profile stock, I can't help but wonder if this data is entirely legit.  I'm not asserting that the data is bogus; I'm merely asking the question to see if anyone has a better sense.

 

The website FAQ indicates that iwaspoisoned.com is "curated".  The level of rigor in this process is not entirely clear.  Here's what the FAQ says: 

 

"Iwaspoisoned.com is curated. Every single report gets both a human review and a technical back end review. These reviews are designed to eliminate malicious, inauthentic, or off topic reports. Misuse or malicious use of the site by users is also against our terms of use policy. Our commitment is to do everything we can to ensure that every report represents a real person who believes they got food poisoning."

 

FWIW, iwaspoisoned.com does have an affiliated website (dinesafe.org) that offers "advanced reporting and analytics" of food safety incidents to the investor community.  For more info, see the FAQ @ iwaspoisoned.com. 

[krazeenyc]

Hey all:

 

There are reports now of another mass food poisoning incident at a Chipolte in VA.  Stock is down 6%+.

 

It just hit me that MAYBE this needs to trade at a DISCOUNT to the market and not a premium.

 

There is a TON of competition now, some of it is pretty good.

 

How many times have they had problems with food safety?  Is this the 4th time?  I seriously don't know, but it is MULTIPLE times.

 

20M people a year get Norovirus and clearly not all of them are getting it from Chipotle. Where are the news stories on all of the other chains where this happens?

 

The market is just overly sensitive to negative news on Chipotle given that it's pristine image was shattered by the initial scare.

 

You've got a poin that perhaps Chipotle gets more press than other chains.  I would counter that IF 20M a year get Norovirus, I doubt that many are getting it from restaurants.  I would suggest a lot of them are getting from home prepared meals or perhaps co-workers. 

 

I eat out a LOT and it is pretty rare that I get anything worse than an upset stomach (and that is rare).  The last serious case of food poisoning was a meal prepared by my ex-girlfriend.  The meal in question had nothing to do with her becoming an EX though.

 

HOWEVER, Chipotle should be on "double alert" because of their past problems AND management has got to know that if there are future problems, the press is going to pounce on it.

 

I find this entire situation fascinating... when I read that it was Norovirus -- I though it was hilarious that the media and public are making  such a big deal about it.  Basically someone with a stomach bug went to a restaurant and a bunch of people got sick.  Norovirus is incredibly contagious and most people get it because they come into contact or are in the same room as someone else who has it.  It's basically a super contagious stomach bug... nothing more and nothing less. My son's class had 26 out of 30 kids absent due to norovirus in the winter. And half of the entire school was sick with it at one point. Once my son got it, despite our every precaution it (wearing masks, airing out the room, disinfecting everything), my daughter, other son, wife and myself all got it within 2 days.

 

If only Chipotle was at a price I thought was attractive due to this news....