They say that bad news travels fast, but thankfully that's not the case with Chipotle Mexican Grill (NYSE:CMG). The chain appears to have emerged largely unscathed in the eyes of consumers after a food-borne virus made dozens of customers and employees ill at a California Chipotle last month.
Ventura County health officials concluded that the gastrointestinal symptoms suffered by roughly 80 customers and 18 employees last month at Chipotle's Simi Valley Town Center eatery were likely the case of a food- or contact-borne disease. Several of the specimens tested came up as positive for norovirus, the contagious malady that typically spreads through the consuming of contaminated food or touching contaminated surfaces.
Norovirus is the highly contagious gastrointestinal infection that makes headlines often when it happens on cruise ships, but it's fairly common. The Centers for Disease Control and Prevention reports that 19 million-21 million catch the acute gastro bug in this country annually with hundreds dying as a result.
Chipotle did the right thing all along. It shut down the restaurant in question. It tossed out all of the food and scrubbed the place down before reopening on Aug. 22. As of earlier this month the 18 burrito rollers that fell ill were still ordered not to return to work until they were medically cleared.
Chipotle is the market darling in fast casual, and when it makes headlines for something other than its stellar growth and fast-moving queues it's usually when it runs out of food. It has bumped into regional outages on everything from carnitas to tomato salsa lately, but the market forgives Chipotle because it's the result of its strict sourcing parameters. Walking into a Chipotle with a sign explaining that it's out of braised pork because there aren't enough farmers making it the Chipotle way is a bragging point.
However, nobody likes to get sick. Nobody likes to see a Chipotle outing followed by diarrhea, nausea, stomach pain, vomiting, and other head and body aches. Thankfully for Chipotle the incident is an isolated one. It also doesn't hurt that this norovirus outbreak didn't get the same kind of media play that it would if it had happened on a cruise ship.
That's good, because consumer sentiment can turn on you even if you are a beloved brand. Chipotle is certainly beloved. It pulled off its highest menu price increase in three years last year, and customer counts continued to grow. Rivals like to point out that they don't charge for a scoop of guacamole, but Chipotle doesn't have a problem commanding a markup on its mashed avocados. Comps posted double-digit year-over-year growth for five quarters in a row before rising a more mortal 4.3% during this year's second quarter. As long as the market doesn't associate Chipotle with getting sick, Wall Street will feel the same way.