Business

Chipotle's profit tumbles after food scare

Chipotle Image copyright Getty Images

Chipotle Mexican Grill has seen its profit tumble after being hit by an E.coli outbreak last year.

The company saw net income for the three months to December drop to $67.9m (£47.12m), a fall of 44% compared with the same period last year.

The US fast-food chain also reported a 6.8% fall in revenue for the quarter, to $997.5m.

Chipotle's chairman and founder Steve Ells conceded it had been a tough time for the firm.

"The fourth quarter of 2015 was the most challenging period in Chipotle's history," he said.

Mr Ells said the firm was pleased to have the E.coli issue behind it and that it was now focused on reducing its food safety risk "to a level as near to zero as is possible". But he warned that 2016 would also be "a very difficult year".

Chipotle said it had expected to see an 8% to 11% drop in quarterly sales as a result of the food safety scares, which started in October last year, damaging the firm's reputation and share price.

In fact comparable restaurant sales - a key industry measure - decreased by 14.6%.

Overall, the company's full year net income for 2015 came to $475.6m, compared to $445.4m in the pervious year.

The fast food chain's shares fell 7% in after hours trading in the US on Tuesday.

Legal action

Image copyright Getty Images
Image caption In December, Chipotle said it was changing its cooking methods in an effort to address food safety concerns sparked by the food scare

In November, Chipotle said it would temporarily close 43 restaurants in Washington state and Oregon while authorities investigated an outbreak of E.coli.

In connection to the food scare, the company is now is facing an investor lawsuit in eight US states, lawsuits from individuals that contracted E.coli, and a federal criminal probe filed by the state of California.

The latest earnings statement also said that the scope of the criminal investigation by the US attorney's office in California has been widened. The company said it would "fully cooperate".

Chipotle was founded in 1993 and operates more than 2,000 restaurants. Its focus is on selling burritos, tacos and salads. It has 23 Chipotle restaurants outside the US, among other businesses.

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