Chipotle faces plaintiff in proceedings pertaining to portion pandemonium

Chipotle was hit with a securities lawsuit by a disgruntled investor who claims leadership at the burrito chain lied about its portion-size debacle. 

According to Michael Stradford, investors like him who owned Chipotle stock between February 8 and October 29 got misled by then-Chipotle CEO Brian Niccol and other leaders.

Specifically, Stradford said Chipotle downplayed social-media scrutiny over the chain’s portion sizes that started this spring. He also pointed to some quantitative evidence: Wells Fargo analysts bought 75 burritos from eight Chipotles to show the portion-size problem was real.

Niccol, now at Starbucks, assured investors in a July earnings call that the skimpy portions were simply outliers. But Stradford notes that Chipotle executives in their past two earnings calls have said their cost of sales are rising and profit margins are dipping, in part because they’re assuring generous portions to counteract the allegations.

Chipotle’s stock fell 1.9% and 7.9% after their July and October earnings reports, respectively, which Stradford said hurt him and other similarly situated Chipotle shareholders. (The company’s stock is still up over 33% year to date.)

In a statement, Chipotle’s chief corporate affairs officer, Laurie Schalow, said the company does not comment on active litigation but it “will vigorously defend our industry leading real food.”