At LikeFolio, we use data gathered from social media to measure consumer sentiment trends and shifts in consumer behavior. Our most powerful metric, “Purchase Intent Mentions,” looks at the number of people tweeting about spending money on a company’s products or services. This is the same metric that Georgetown University used to determine that social data is predictive as well as being a major unexpected component of sales that most analysts miss.
In Chipotle’s case, a purchase intent mention that someone Tweets could be: ‘Headed to Chipotle for some grub,’ or: ‘This Chipotle line is so slow.’ This approach to analyzing social data gives us a real-time view into consumer spending patterns without having to run imprecise surveys or wait for company-issued reports, which usually lag behind purchase intent metrics sourced from social data by anywhere from 30 to 120 days.
Chipotle Mexican Grill (Photographer: Daniel Acker/Bloomberg)
At the beginning of 2017, things were actually starting to look good for Chipotle. Social data had firmed up from a disastrous 2016 for the company, which led us to predict that the worst was behind Chipotle.
By January, the company had begun to report store sales numbers that indicated a turnaround was underway. Analysts were raising expectations and the stock rallied over 100 points to the upside as investors began to take the Chipotle turnaround story seriously.
But then something dramatic happened. When we looked at purchase intent mentions, we saw a complete breakdown take place early in the year. In fact, we saw Chipotle turn in all-time lows of purchase intent mentions, our most comprehensive and critical measure of consumer spending.
This massive negative shift led u s to issue a warning that the Chipotle turnaround story was officially over just a few weeks ago with the stock sitting around $480/share.
And then it happened…
On June 20th, company warned that its sales and margins for 2017 would be far lower than analysts expected. The stock tanked by over 30 points, its biggest loss of 2017, and currently sits nearly 90 points below the highs it saw immediately after our bearish warning.
Chipotle Mexican Grill
How did we call this?
Our company, LikeFolio, uses Twitter (TWTR) data to discover insights into consumer behaviors. In this case, the insights revolved around how few consumers were walking into Chipotle stores.
Chipotle Purchase Intent Mentions
The chart above shows Chipotle purchase intent mentions (green line) over the past five years. There are three areas to focus on to understand the methodology of our predictions:
Blue Circle – This area in Fall 2016 was showing purchase intent mentions firming up after a consistent drop throughout the year. This is what led us to issue our initial turnaround report in December 2016. You can see the stock (grey line) rallied over 100 points in the months following as reports of increased same store sales began to come out.
Red Circle – This drop is what told us the turnaround had not taken hold. Watching this drop as the new year turned, and fail to recover as we moved into spring, was enough for us to know that not only was there no turnaround at Chipotle, but that the bleeding wasn’t over. We warned, and yesterday the company confirmed, that sales weren’t matching up to expectations, and the stock retreated back into the 410’s.
Purple Circle – Another drop in purchase intent mentions is currently underway and tells us that yesterday’s warning may not be the end of the bad news for Chipotle investors…
We’ll continue to keep a sharp eye on purchase intent mentions and other social data metrics for the company, especially as they begin ramping up their marketing spend for the remainder of the year. It’s been a wild ride with Chipotle, and unfortunately for shareholders, the worst may not be behind them.
The sign for Chipolte Restaurant (Photo credit: PAUL J. RICHARDS/AFP/Getty Images)