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Chipotle Faces Quarterly Loss After Food Scares

US restaurant chain Chipotle has warned that it expects to plunge to its first quarterly loss since its stock market flotation in 2006 as it battles to recover from a series of food scares.

The Denver-based company said sales were down 26% in February, following a 36% decline for January. It (Other OTC: ITGL - news) has now warned that it is heading for a first quarter loss. Shares (Berlin: DI6.BE - news) fell 3% in after-hours trading.

Chipotle Mexican Grill (NYSE: CMG - news) had previously said it had expected its earnings per share results "around break even" after taking into account higher costs for promotions, marketing and tighter food safety to win back customers.

It is trying to bounce back after an E.coli outbreak and other incidents sent sales plummeting starting from the end of October.

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The firm said a promotion last month offering customers coupons for free burritos on their mobile phones had helped sales start to recover last month.

This had continued into the first week March as the fall in sales narrowed though they were still down 22%.

But there was a further setback after that when the decline worsened to 27% in the second week, after a restaurant in the Boston area was closed after workers were reported to be sick – though there were no linked cases of customers being ill.

Credit Suisse (LSE: 0QP5.L - news) analyst Jason West said while Chipotle's promotions for free food could bring many customers back into stores they could also eat into sales from regulars who had stuck by the chain.

In a corporate filing, Chipotle said its first quarter results would show a charge related to its free burrito offer as well as legal costs in relation to an investigation by the US Department of Justice.

Chipotle said that for the quarter it expected to report a loss of $1 (71p) per share or more, down from a profit of $3.88 (£2.75) per share in the same period last year.

The US chain has about 1,900 stores, with a handful in London.