Chipotle’s sales fell in the last quarter of 2016, and the company is no longer blaming the less-than-stellar performance on its inability to bring back customers after its very public bout of food borne illness issues. Instead, the falter is the result of spending too much money on ads, promotions, and avocados.
Business Insider reports that Chipotle released its preliminary results for the fourth quarter of 2016, recording an earnings per-share of nearly half what analysts expected.
Chipotle and analysis had expected the company’s fourth-quarter earnings per share to come in around $0.96, but instead it ranged from $0.50 to $0.58. Comparable store sales are estimated to tumble by 4.8% for the same quarter, a rate that is worse than the previously estimated 3.7% decline.
For its part, Chipotle tells Business Insider that the lower sales report is the result of too many expenses.
Namely, the company says it increased spending on promotions and television ads — both were measures used by the company to bring back customers after its food borne illness issues. In the past year, the company has launched numerous promotions offering guests free food.
Additionally, an avocado shortage — which the company said wouldn’t affect its ability to offer customers guacamole — resulted in Chipotle paying more for the fruit.
To put the shortage into perspective, in Oct. 2015, the U.S. imported about 35 to 45 million pounds of Hass avocados every week from Mexico, the Hass Avocado Board says. But in Oct. 2016, we only imported 8.5 million pounds of the produce.
During the shortage, a Chipotle spokesperson said the company didn’t plan to pass along any of the cost for the more expensive fruit to customers, claiming the company didn’t incur any supple disruptions.
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