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Why Chipotle Mexican Grill, Jabil Circuit, and Williams-Sonoma Slumped Today

By Dan Caplinger - Mar 17, 2016 at 6:40PM

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Even though the market climbed, these stocks got left behind. Find out why.


Image source: Chipotle Mexican Grill.

Thursday was another strong day for the stock market, and investors focused in particular on promising moves in the materials, industrial, and transportation sectors that supported the overall market. Energy prices climbed once again from their recent lows, and a substantial decline in the value of the U.S. dollar against major foreign currencies contributed to the notion that profits for U.S. multinationals might finally start to climb more significantly as currency headwinds subside.

Yet even with the mood being generally optimistic, there were some stocks that missed out on the rally. Among the worst performers on the day were Chipotle Mexican Grill (CMG 0.20%), Jabil Circuit (JBL 0.86%), and Williams-Sonoma (WSM -2.99%).

Chipotle Mexican Grill lost 6% after analysts at Jefferies downgraded the stock of the fast-casual burrito chain. The analyst report acknowledges that Chipotle has done an exceptionally good job at orchestrating a comeback from its extensive foodborne-illness concerns late last year, especially given that its core customer base is notorious for having limited brand loyalty in the food arena. Yet the problem that many people aren't acknowledging is that Chipotle had already started to see some growth pressure even before food-safety issues arose, and the report pointed to relatively weak comparable-restaurant sales in February despite Chipotle's efforts to encourage customers with large discounts and other promotional activity. The fast-casual chain will need to keep working hard to reestablish itself as a leader in the restaurant industry, and that could require more effort than investors had expected going forward.

Jabil Circuit fell almost 11% after the manufacturing-services provider reported its fiscal second-quarter results Wednesday afternoon. Jabil's revenue rose 2%, leading to a 14% rise in core diluted earnings per share compared to the previous year's fiscal second quarter. However, many investors were concerned with Jabil's guidance for the current quarter and the rest of the fiscal year, and CEO Mark Mondello cited "reduced demand in mobility" as potentially holding back the company's results. Fiscal third-quarter guidance for sales of $4.1 billion to $4.3 billion would fall well short of the $4.72 billion consensus figure among investors, and guidance for core earnings of $0.12 to $0.18 per share compares unfavorably to current calls for more than $0.50 per share among investors. Some fear Jabil's guidance bodes ill for iPhone sales going forward, but regardless of the cause, shareholders weren't pleased with the news.

Finally, Williams-Sonoma dropped 6%. The home-furnishings retailer posted disappointing holiday-quarter earnings Wednesday afternoon, reporting revenue growth of less than 3% as well as a 4% drop in net income, hitting the low end of its previous guidance. Comparable-brand sales inched upward by 0.8% companywide, but only the West Elm concept produced sizable growth, and a 2% decline in comps at the company's Pottery Barn concept stood out in falling short of expectations. The company tried to put the quarter's results in the context of long-term efforts to develop a more successful corporate strategy, but investors weren't happy with the slow progress of past strategic moves. Williams-Sonoma needs to take advantage of a relatively favorable environment for home-related retail if it wants to bounce back from its recent woes.

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Stocks Mentioned

Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,331.71 (0.20%) $2.69
Jabil Circuit, Inc. Stock Quote
Jabil Circuit, Inc.
JBL
$55.15 (0.86%) $0.47
Williams-Sonoma, Inc. Stock Quote
Williams-Sonoma, Inc.
WSM
$122.32 (-2.99%) $-3.77

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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