And the hits just keep on coming. In a double-whammy for investors hoping to catch Chipotle's falling-knife, the mexican fast-food restaurant reports a 30% collapse in same-store-sales for December and receiving a grand jury subpoena with regard the California Norovirus event. The stock crashed 10% on the news. However, the stock's initial collapse has been rescued as CMG reports a boost to its buyback program... seriously!
From CMG's statement:
December 2015 Sales Trend Detail
In a report on Form 8-K filed on December 4, we noted that comparable restaurant sales were trending at -16% at the onset of the month. Following the isolated norovirus incident during the week of December 7 in a Chipotle restaurant in Brighton, Massachusetts, which garnered national media attention, comparable restaurant sales decreased to average -34%, and then recovered to -31%. The week of December 21, 2015, the U. S. Centers for Disease Control and Prevention (CDC) announced that new illnesses related to the E. coli incident associated with Chipotle restaurants in October and November 2015 had slowed substantially, but also that it is investigating five new cases that were reported in November 2015 of the same strain of E. coli O26 but with a different DNA fingerprint. Following this announcement and related national media attention, our comparable restaurant sales trended down to -37%. For the full month of December, comparable restaurant sales were -30%. Future sales trends may be significantly influenced by further developments.
Receipt of Grand Jury Subpoena
In December 2015, Chipotle was served with a Federal Grand Jury Subpoena from the U.S. District Court for the Central District of California in connection with an official criminal investigation being conducted by the U.S. Attorney's Office for the Central District of California, in conjunction with the U.S. Food and Drug Administration's Office of Criminal Investigations. The subpoena requires us to produce a broad range of documents related to a Chipotle restaurant in Simi Valley, California, that experienced an isolated norovirus incident during August 2015. We intend to fully cooperate in the investigation.
It is not possible at this time to determine whether we will incur, or to reasonably estimate the amount of, any fines, penalties or further liabilities in connection with the investigation pursuant to which the subpoena was issued.
The stock crashed...
But the stock is being rescued:
This report is also filed to announce that our Board of Directors has authorized repurchases of Chipotle common stock with a total aggregate purchase price of $300 million, exclusive of commissions.
These authorized repurchases are in addition to $300 million in repurchase authorizations announced on December 4, 2015, of which $116 million remained available as of December 31, 2015.
During the fourth quarter 2015, we repurchased approximately 609 thousand shares of stock at an average price of $556 per share. During the month of December, we repurchased approximately 401 thousand shares of stock at an average price of $527 per share. The Board's authorization of the repurchase program may be modified, suspended or discontinued at any time.
So they are facing a huge loss on recently purcahsed buyback shares... but Buybacks are the solution to all problems it would appear...
How long will that bounce last?