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Chipotle Expected to Post First-Ever Quarterly Loss Today

Just how much have free burritos affected the bottom line?

Robert S/Flickr

Chipotle is expected to post its first-ever quarterly loss later today when it announces first quarter 2016 earnings. In addition to a continued decline in same-store sales, the company will update investors on the effects of heavy promotional spending (it doled out some $70 million worth of free burritos in recent months) meant to bring more foot traffic through the fast-casual burrito chain.

So how bad will it be? Predictions vary. Earlier this month, Foursquare CEO Jeff Glueck predicted the chain would report its same-store sales dropped in the neighborhood of 30 percent. Goldman Sachs analysts removed CMG from Americas Buy List, downgrading the stock to neutral. "Our own survey and aggregated social media data on customer opinions also remain concerning," read the Goldman report. "We lower our EPS estimates to reflect a reduced top line and higher restaurant expenses." Among analysts' key concerns are additional headline risk (from Norovirus incidents), higher-than-expected promotional costs (thanks to all those free burritos), and consumer survey data.

Though many warn that Chipotle likely won't make gains until 2017, some analysts have stronger confidence in the brand. In a post on Seeking Alpha earlier today, analysts at Adelphi Venture Capital write that they expect Chipotle to recover more quickly than the market expects. "Much like Starbucks we believe the company commands strong loyalty from its customers which will help its recovery," they wrote, adding "promotional activities may have come at a cost, but the short term pain will be worth the long-term gain."

According to Business Insider, JP Morgan's John Ivankoe upgraded his rating on the company to "Overweight." Ivankoe raised his price target 10 percent, to $510 per share, and said he expected earnings to turn positive in the fourth quarter. Ivankoe also recommended that the chain install drive-thru windows "to increase customer visibility." Chipotle President Steve Ells hasn't publicly spoken about drive-thru Chipotles since 2012 when, on an earnings call, he said it was "certainly something that we could try in the future."

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