The brand has been soiled, quite literally. At a recent foray into the King of Prussia mall, I questioned several of the store clerks about Chipotle, and almost in unison, these millennials were revolted by the specter of even mentioning CMG.
However, for the day, shares of CMG are skyrocketing higher by 5.6%–on the news that failed hedge fund manager and profligate media whore for his bad ideas took a 9.9% stake.
Stifel, however, is not eating the proverbial burrito and have taken this opportunity to shit on the shares of CMG, as well as the entire Pershing Square office.
“Pershing Position Creates Excellent Selling Opportunity”
Reiterate Sell Rating Following Announcement of Bill Ackman Purchase.We emphatically reiterate our Sell rating on CMG shares following news that Pershing Square has started a 9.9% activist position. We cannot fathom Pershing’s operational or mathematical investment thesis. Frankly, we predict that Pershing’s activist effort is most likely to accelerate and further assure CMG’s “tail operational risk” of increasing management and hourly turnover rates (the number one determinate of a restaurant’s profitability). Mathematically, we continue to assert that to justify CMG’s current $414/sh valuation, some combination of the following two irrational assumptions must be made:
Mathematically, we continue to assert that to justify CMG’s current $414/sh valuation, some combination of the following two irrational assumptions must be made:
(1) that the economic laws of diminishing returns (market-maturation curves for Restaurants) do not apply to the Chipotle Mexican Grill brand; and/or
(2) that the mathematical laws of Discounted-Cash-Flow do not apply to CMG, the stock.
The analyst’s 12-month price target for the stock is $215.
Indeud.
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I will say once again that I am one of the largest Chipotle advocates and consumers. I worked at one in college in 2005, thought it was not only delicious but revolutionary for fast food, and have been getting their burritos pretty regularly since. Until that E-Coli BS happened.
That was an obvious turnoff. The larger turnoff is that traffic is so far down at my local place [and from what I hear many others] that they keep the bins less than half full. The food is old and stale and the employees are always new and don’t give a shit about your experience – they are not bought into the concept at all and have zero pride in the brand. They are McDonald’s idiots, in other words.
The great thing about CMG was the freshness of the food. This was partially fantasy, partially due to consistent turnover of the bins, and partially due to their actual adherence to quality products. The first 2/3rds of their brand is now destroyed and it doesn’t matter that they want to become better at quality products because nobody believes them and their food isn’t turning over.
That line at Chipotle wasn’t annoying because you knew it ensured fresh food, whether you consciously thought about that or not.
CMG is down a lot so a sustained pop is not impossible. But it’s no longer a fortress.
And again, I am not only in the thick of their core demographic but was an early adopter and huge advocate for the brand. They can disappear tomorrow for all I care. I don’t go there anymore.
I’ve noticed a marked deterioration in the quality of worker too.
Ditto on all that. I had a great burrito there once, ONCE, but it was when they opened at 11. Then the quality goes downhill.
The only thing that can save this ship is retaining employees who give a shit – can that even happen in this industry?
Short CMG, long diarreah planet.
Line still out the door daily for hours on end at Boulder and Denver locations I see. A couple addicts I know are all in on this Chiptopia thing. I’m a once a monther there and haven’t noticed any drop in quality over ~5 years at these locations. Still the best value lunch at around $7 for the chicken or veggie options. You can’t even get a value meal at McDonalds for that these days. All other fast casual places are $9-11 for a meal. Long live Chipotle.
CO Chipotle is way different than East coast chipotle. I wonder what the difference could be?
I think zuul1 made a thoughtful, reasoned and solid comment, and I agree with braveflaps and Fly as well.
It’s not socially or politically correct to say this, but entry level, low wage employees may not be able to consistently and reliably practice the food safety necessary to make the concept work. With so many locations and millions of meals served, even a small error in the process or staff performance will soon become a big deal.
I’m not expecting a first year attorney to give me the absolute best advice. An associate gave me bad advice years ago, and I haven’t forgotten the anger. You have to pay up for the best and most competent attorneys, and this is about $550 an hour in my business.
Translating to the Chipotle space this means a manager on duty at all times, paid a salary that is livable and comfortable, and staff members making a premium hourly wage over other jobs in the space. This means a $17 burrito, and most of the customers in the space are not going for this.
I don’t get Ackman on this one. What happens if another bout of food poisoning breaks out? Pretty high risk on top of all the other stuff that has happen to him lately.
I never understood the CMG hype. I tried them twice and both times thought it was complete shit. Then again I grew up in Texas and was raised on real gut bombs, not this hippified bullshit being passed off as a burrito today.
I’m with you on that Po Pimp. I was living in Los Angeles the first time I tried CMG. My first burrito experience had been local LA food. I thought CMG it was total crap that left me unsatisfied. Never went back to CMG until I relocated far from real-deal Mexican food.