We remain bearish on Chipotle (CMG) as all signs point to a continued rocky recovery for the brand. After the company's highly publicized food safety problems, a survey done by Civic Science shows that customers are refusing to return to the brand in a meaningful way.

In another recent episode of what has become a sad soap opera, Steve Ells, newly-appointed sole CEO of Chipotle, and his management team attempted to reassure the investing public at Barclay's “Eat, Sleep, Play – It’s Not All Discretionary” hospitality sector conference. But in doing so, they raised even more questions.

In what quite a few people saw coming, Chipotle formally announced that co-CEO Monty Moran would be stepping down from his position in 2017. He is also relinquishing his seat on the company’s Board of Directors effective immediately.

Following this important announcement, Ells and Chief Marketing & Development Officer, Mark Crumpacker, proceeded to lay out all of the issues that their brand continues to face. Their laundry list not only showed that the brand was not recovering at the rate they had expected, it also unveiled some troubling realizations that we had not heard before.

Our takeaway:

· Chipotle continues to fail at streamlining the order fulfillment process.

· Management lost sight of the primary purpose of business.

· Employees lacked adequate training, but were promoted nonetheless.

· Management admits that turnover has increased and attributed this to a lack of training (employees lacking skills to succeed) and employees feeling overwhelmed by the complexity of the job, post-outbreak.

· A long and drawn-out hiring process.

· Significant complaints filed by customers, with complaints being (in order of significance): Long lines/slow order throughput; restaurants running out of food; messy dining rooms.

· Competition has improved, resulting in increased competition when trying to win back customers.

Pardon our frankness here, but it’s no wonder why eating at Chipotle made its customers sick if employees lacked adequate training, but were promoted nonetheless. Compounding this, management seems to be reaching for excuses, as many of their reasons were contradictory.

For example, they linked turnover to a lack of training, but also linked it to overly-complex training. Ells went on to say that there were instances where they would lose many employees to their long and drawn-out interview process. But wouldn’t they want to make sure that an employee has the capacity to perform such a job, especially given the scrutiny surrounding Chipotle’s food safety practices? If the answer is yes, then such a long and drawn out interview process may actually be necessary.

More importantly, these are all the reasons the company needs to slow its unit growth and focus all available resources on fixing the store performance. Fixing these issues will take time and money. Bottom line here is that the longer Chipotle resists reality, the harder it becomes to actually fix the business. The company needs an entire overhaul from top to bottom.

We believe shares are headed down from here to $250.

Howard Penney is a managing director and restaurants analyst for Hedgeye, an independent investment research and online financial media firm based in Stamford, Connecticut. Neither he nor his firm hold any positions in Chipotle.

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