High-growth stocks often follow a predictable pattern, enjoying monumental rises in their share prices only to see their businesses inevitably slow. Chipotle Mexican Grill (NYSE: CMG) didn't follow that exact script, with company-specific issues proving to be the primary obstacle in the burrito maker's path. In the end, though, the result has been the same: Chipotle will never again be the high-growth stock it once was.
That doesn't mean that Chipotle is necessarily doomed to be a terrible investment going forward. But if you're expecting a return to the heyday of yesteryear, though, you're likely to be disappointed. Here are five reasons why.
Stats on Chipotle Mexican Grill
| Metric | Chipotle |
|---|---|
| Revenue, past 12 months | $4.40 billion |
| 1-Year revenue growth | 13.8% |
| Net income, past 12 months | $148.4 million |
| 1-year net income growth | 98% |
Data source: Chipotle investor relations.
1. Failure of mission
The entire idea behind Chipotle's initial success was that it sought to make customers feel better about what they were eating. The Food with Integrity concept captured the spirit of what many restaurant-goers were looking for: food they could see as healthy and socially conscious.
When its reputation was intact, Chipotle built up momentum and found dramatic success. When that reputation came under fire due to multiple episodes involving food-borne illness, the burrito chain faced a big challenge. It had opportunities to make things right, but the repeated difficulties Chipotle has encountered will make it next to impossible for Chipotle to restore the trust of its customers. That more than anything else will prevent the company from seeing the fast growth it did early in its history.
2. Efforts to branch out haven't stuck
As successful as it was, the Chipotle restaurant concept was only one facet of what the company's growth could have looked like. Multiple alternative storefronts could have led to even greater success.
Yet Chipotle has largely given up on concepts that looked promising. ShopHouse Southeast Asian Kitchen got sold off early in 2017 after failing to deliver on its initial potential. Pizzeria Locale and the Tasty Made burger idea haven't led to any business-changing shifts for Chipotle, either. With many of Chipotle's innovations being easy for competitors to copy, the innovating Mexican food chain seems to have missed out on its opportunity to leverage its brand into other food niches.
Image source: Chipotle Mexican Grill.
3. Leadership transition
Founder Stephen Ells has decided to give up his role as CEO, making way for a new generation of leadership that could presumably give Chipotle a fresh start. Recent failures of leadership proved too much for Ells to maintain the post, including product rollouts that didn't go nearly as well as many had hoped. Yet whoever fills those shoes will face the same difficulties.