Chipotle's food safety woes lead to criminal investigation, sales slide

Sales at fast casual chain Chipotle Mexican Grill continue to tumble as the company's struggle with a bout of foodborne illness issues at locations across the country deepens.

The company, on Wednesday, reported a double dose of bad news. Sales at restaurants open at least a year slid 30% in December and fell 14.6% during the fourth quarter. The company had previously predicted an 11% decline for the period. Chipotle also said it has been served with a federal grand jury subpoena over an August  norovirus episode in California.

The Denver-based company said it was served with a subpoena in December and notified about an official criminal investigation being conducted by the U.S. Attorney’s Office for the Central District of California, in conjunction with the U.S. Food and Drug Administration’s Office of Criminal Investigations.

"The subpoena requires us to produce a broad range of documents related to a  Chipotle restaurant in Simi Valley, California, that experienced an isolated norovirus incident during August 2015," the company says in an Securities and Exchange Commission filing. "We intend to fully cooperate in the investigation.  It is not possible at this time to determine whether we will incur, or to reasonably estimate the amount of, any fines, penalties or further liabilities in connection with the investigation pursuant to which the subpoena was issued."

The burrito chain's stock has taken a walloping after the series of foodborne illness outbreaks. Chipotle (CMG) shares were down nearly 1% at $444.74 in morning trading. The stock has fallen by about one third in last 12 months. The company said Wednesday that it approved the repurchase of up to another $300 million of its shares, in addition to a $300 million authorization approved in December. During the fourth quarter it said it repurchased 609,000 shares at an average price of $556 apiece.

A norovirus episode in Boston last month sickened more than 120 college students. There have also been dozens of cases of Chipotle customers being sickened with E. coli in nine states over the last few months. The company has yet to confirm the cause of the outbreak.

In the August case in California, a Chipotle restaurant in Simi Valley, Calif. was temporarily closed after dozens of customers and 18 employees reported symptoms of norovirus. The restaurant was reopened after restaurant operators did a deep cleaning of the store.

"As a matter of policy, we do not discuss pending legal actions, but we will fully cooperate with this investigation," Chris Arnold, a Chipotle spokesman said. He declined to offer further comment on the company's disclosure about the federal probe.

Also in August, Minnesota health and agriculture officials reported an outbreak of salmonella among customers of 17 different Chipotle restaurants located primarily in the Twin Cities metro area. Minnesota Department of Health officials cited tomatoes as the cause of outbreak, which affected 64 customers. Nine of those sickened customers were hospitalized.

Chipotle has marketed itself as a healthier option to fast food, touting itself as the first major national chain to eliminate genetically-modified ingredients from most of its menu.The company has more 1,900 restaurants.It reports fourth-quarter financial results on Feb. 2.