Chipotle Mexican Grill was sued Monday by a shareholder who said the company covered up the fact that many of its restaurants skimped on portions, forcing the chain to pay more for food and hurting its stock price.
Shareholders say in a proposed class action lawsuit filed in federal court in Santa Ana, California, Chipotle fails to disclose that customers are increasingly dissatisfied with inconsistent portion sizes for burritos and rice bowls. said.
The truth came out as customers voiced their dismay on TikTok and other social media, and Chipotle is offering what CEO Scott Boatright and predecessor Brian Nicol called “generous portions” at more than 3,600 restaurants. They said that they began to reemphasize what had happened in the past.
The cost of repairing the damage weighed on profits, and Chipotle's stock price fell after it released its second-quarter results, the suit said. The Oct. 30 decline wiped out about $6.5 billion in market value.
The lawsuit seeks unspecified damages from purchasers of Chipotle stock and options between February 8, 2024 and October 29, 2024.
Chipotle did not respond to requests for comment.
The lawsuit was filed hours after the Newport Beach, Calif.-based company removed the “interim” tag from Mr. Boatwright's title.
Mr. Nicol stepped down as CEO in August to take the same position at Starbucks.
Chipotle's stock price has increased more than eight times in the six-and-a-half years that Mr. Nikkor has been at the helm.
Mr. Nicol and former chief financial officer Jack Hartung are also named defendants in Monday's lawsuit. Hartung became Chipotle's president and chief strategy officer on October 1.
The case is Stratford v. Chipotle Mexican Grill, Inc. et al., U.S. District Court for the Central District of California, No. 24-02459.
