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Food safety scandals continue to haunt Chipotle

By Toby |

Chipotle (CMG) was still recovering from a string of food safety lapses that occurred in 2015. The prolonged crisis had badly damaged the company’s reputation. Both sales and stock price have been battered since then. Apparently, the problem is back again as the company has temporarily closed down its Ohio restaurant after its customers fell ill. This news sent the stock plummeting in the after-hours trading on Monday. The downward momentum continued on Tuesday and the stock slid more than 6% in the morning trading session.

This year when the fast-food chain hired CEO Brian Niccol, the company shares shot high as investors were optimistic about a turnaround at Chipotle. During an interview with FOX Business on Monday, Niccol said Chipotle is looking to put food-borne illness scare behind them. But this latest episode of food scare came as a nasty reminder to the investors, causing them to dump the shares.

Apparently, the problem is back again as the company has temporarily closed down its Ohio restaurant after its customers fell ill.

The initial reports made the incident appear small as just 10 complaints were received. But on Tuesday, CNBC said the Delaware General Health District received more than 100 calls and the number continued to rise. The latest health scare came from a Chipotle restaurant in Powell, Ohio where customers fell ill with symptoms like nausea and diarrhea. The company, however, plans to re-open the restaurant after it gets an approval from the health department. Chipotle could head for the worse if this new episode turns into another outbreak.

RELATED: Chipotle changes its strategy

While Chipotle was getting battered over food poisoning outbreaks, its rivals took complete advantage of the situation and increased their sales through clever marketing and menu offerings. Now Chipotle is trying to win back its customers with improved menu choices. Under the leadership of Niccol, Chipotle is set to make some much-needed strategic changes.

RELATED: Chipotle has better weightage than Shake Shack

But as of now, the industry watchers might be more interested in the company’s plan to reopen its Ohio restaurant. It’s worth noting that on July 27, Chipotle shares reached a new 52-week high ($483.29) and now the stock has plunged more than 11% from that.

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