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Why Chipotle Mexican Grill, Inc. Stock Lost 12% in October

CMG Chart

What happened

Shares of Chipotle Mexican Grill, Inc. (NYSE: CMG) were unraveling last month, after the burrito chain turned in a woeful third-quarter earnings report, essentially signaling the end of the company's turnaround following the 2015 E. coli outbreak. According to data from S&P Global Market Intelligence , the stock fell 12% in the month, hitting lows not seen in five years.

The stock was up for the month before the Oct. 24 earnings report, but plunged after the results came out:

CMG data by YCharts

So what

Comparable sales in the quarter rose just 1% as the company struggled to bounce back from a July Norovirus outreak at a single Virginia location, and its widely anticipated release of queso in September turned out to be a disappointment . Factoring in the 21.9% comparable-sales decline in the quarter a year ago, Chipotle's two-year comps for the quarter were down more than 20%. The customer recovery it had experienced in the first half of the year came to halt. That's a big problem.

Chipotle noted that earnings per share more than doubled to $0.69, but that was below analyst estimates, and a far cry from the $4.59 it posted in the third quarter of 2015. Not surprisingly, the stock plunged 15% the day the report came out.

The exterior of a Chipotle location in Manhattan

Image source: Chipotle.

Now what

Management offered little encouragement for investors who hoped the results were just a speed bump in Chipotle's recovery. It saw comparable sales growth in the low single digits for the fourth quarter, calling for full-year comp sales growth of 6.5%, down from a prior forecast in the high single digits. The company at one point aimed for EPS of $10 this year, but analysts now see just $6.77 in profit per share this year.

Chipote dialed back its new store openings for 2018, a wise but belated move , and a sign that management still has more work to do to shore up operations.

The fast-casual chain's collapse over the past two years is nearly unprecedented in the restaurant industry, as the one-time stock market darling has lost two-thirds of its value and remains in crisis. The new store opening reset may help, but with queso flopping , there's little hope for a catalyst that will suddenly jump-start growth.

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Jeremy Bowman owns shares of Chipotle Mexican Grill. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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