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Burrito Bummer: Chipotle Sales Fall Short Despite Free Food

Apple, Chipotle report quarterly losses 0:30

Chipotle's free food giveaways aimed at luring back diners after a string of food safety lapses last year failed to revive sales as much as Wall Street expected during the first quarter and its stock fell almost 3 percent.

Shares in the burrito chain have lost about one-third of their value since food safety woes surfaced with news it had closed dozens of restaurants in the Pacific Northwest due to an E. coli outbreak. The stock was down 2.8 percent at $433.24 in extended trading on Tuesday.

Related: Chipotle Closes Restaurants During Lunch for Food Safety Meeting

Sales at restaurants open at least 13 months tumbled 29.7 percent for the first quarter, more than the 28.4 percent drop targeted by analysts polled by Consensus Metrix.

The Denver-based chain also reported its first quarterly loss as a public company. Its net loss of $26.4 million, or 88 cents per share, was less steep than the 95 cent per-share loss analysts had expected, according to Thomson Reuters I/B/E/S.

Chipotle giving away even more free burritos 0:21

Chipotle's restaurant level operating margin was 6.8 percent, down from 27.5 percent in the year-earlier quarter, as weak sales, and costs related to food giveaways, safety testing and waste dinged results.

The company has sent out millions of coupons for free food, promotions potentially valued at more than $62 million.

Related: Back to Burritos: Chipotle-Linked E. Coli Outbreak Over, CDC Says

Bearish analysts have warned that such freebies could train diners to hold out for gratis grub, while bulls say they are convincing diners that it is safe to eat at the chain following last year's food safety lapses, which included outbreaks of E. coli, salmonella and norovirus.

The company expects loyal customers to resume their Chipotle habits, but the chain's founder and co-Chief Executive Steve Ells on March 16 estimated that 5 percent to 7 percent of infrequent customers may never return.