Customers Still Haven’t Come Back to Chipotle

The fallout from Chipotle’s string of food-borne-illness outbreaks, which started last fall, continues—and according to analysts at Morgan Stanley, it could last for years.

On Friday, ahead of Chipotle’s scheduled announcement of second-quarter earnings on July 21, John Glass, an analyst at the bank, downgraded the chain’s stock based in part on the results of a survey of diners conducted by Morgan Stanley. The bank found that a quarter of Chipotle’s customers have stopped dining there as frequently as they once did or are not visiting the chain at all. The survey was conducted in June, more than six months after the last reported illness from the outbreaks that were tied to Chipotle and five months after the Centers for Disease Control and Prevention closed its investigation into what caused them.

In light of that new data, “the sales recovery will remain more protracted than the market believes, and possibly more costly as a result, as [Chipotle] likely needs to ramp up marketing spend to lure consumers back in,” Glass wrote in a research note. “A full sales recovery to prior peak volumes could take years.”

Chipotle stock hit a high of nearly $750 a share last August, and the price has more or less dropped ever since. At the time of this writing, it was at $408 a share, and in recent weeks, it has been trading in territory Chipotle hasn’t seen since 2013.

If Chipotle executives are looking for a glimmer of hope, Jack in the Box recovered from its deadly E. coli outbreak, which killed four children and sickened 732 people in 1993. Sales at the chain in the weeks following the outbreak dropped by 37 percent compared with the prior year’s performance.

Giving away burritos and other freebie efforts to draw once-loyal consumers back to Chipotle have proved popular, if not wholly successful. When the chain closed all its restaurants for a day of food-safety training in February, 5.3 million people downloaded the “rain check” coupon for a free burrito that Chipotle made available. The campaign led to a bump in consumer sentiment, as another survey by an investment bank found, but the new data suggest that the goodwill may have been short-lived.

While the source of the E. coli bacteria in the main Chipotle outbreak was never determined, the company has overhauled its food-safety and prep protocols in an effort to calm consumer fears and stave off outbreaks. One of the changes involves undoing a practice that set Chipotle apart from its fast-food and fast-casual competitors: Instead of each restaurant preparing all its own ingredients, some items, including its steak, are now precooked in large quantities at a central commissary kitchen. Doing so not only helps cut down costs but guarantees that what gets sent out to each store has been cooked and handled safely, killing off any bacteria that might be present on the meat.

While some diners may be staying away over fears of food-borne illness, Chipotle’s new, safer steak isn’t endearing any old fans, who have found all sorts of ways to call it gross on social media and elsewhere across the internet.