Boston, Massachusetts – Chipotle has had a hard year because of food safety issues related to E. Coli, salmonella and norovirus outbreaks linked to their restaurants, but this week the Mexican Grill chain rejoices for the news that the Boston-Cleveland Circle restaurant received a clean bill of health. The location had been closed since Dec. 7 due to a norovirus outbreak that sickened 136 Boston College students. Last Saturday, the restaurant reopened and the Boston’s Chief health inspector himself had lunch there on Monday to infuse public confidence.
“The Chipotle is probably the best place to eat right now, because it’s the cleanest place in Boston. They have a clean bill of health,” declared William Christopher Jr., the Boston Inspectional Services Department Commissioner.
As the investigation of the recent norovirus outbreak unfolded, Boston’s Inspectional Services Department had found a variety of food-safety violations. The Chipotle restaurant was keeping the onions near raw chicken and the temperature of their meats was inadequate. But the worst thing was that the company allowed a sick employee to work and have contact with the food, which led to dozens of reports of food-borne illness. Norovirus is highly contagious and an infected person can easily transmit it through direct contact with food and water. The virus can also be easily spread by contact with contaminated surfaces.
Boston’s health authorities finally determined that the sick employee had been the only cause of the norovirus outbreak. They said that the Cleveland Circle restaurant was supplied with fresh ingredients and that all of the employees have successfully completed a food safety program.
Nevertheless, the Boston outbreak, combined with the rest of the outbreaks across the United States in 2015, had a significant impact on Chipotle’s shares. According to a report published by CNBC, the Mexican chain’s shares are impossible to value right now. On Dec. 4, Chipotle predicted that shares had dropped 8 percent to $518 in extending trade, warning that sales could tumble 8 to 11 percent for the fourth quarter from a year earlier. That is far worse than what analysts had been anticipating and would mark the first major decline in Chipotle’s history. The company estimated similar restaurant sales guidance for 2016.
Moreover, the Mexican chain announced it expected to spend $6 to $8 million in the fourth quarter to solve food-safety problems, but clarified that the estimation does not include costs of expenses for legal claims.
Alex Rosenberg from CNBC puts it this way: to determine a specific stock’s value, it is necessary to estimate how much a company is expected to earn and then multiply that number by an “earnings multiple” that includes the future growth the company is supposed to reach. Chipotle’s shares are so hard to value at the end of such a difficult year because both numbers remain a mystery.