Bank Of America Downgrades Chipotle Stock Because It Pays Employees 'Too Much'

Bank of America has downgraded Chipotle stock due to its concerns that the restaurant chain pays its employees too well according to CNBC. (Mike Mozart of JeepersMedia / Flickr)

Bank of America has downgraded Chipotle stock due to its concerns that the restaurant chain pays its employees too much according to CNBC.

Bank of America Merrill Lynch downgraded Chipotle and cut its earnings targets for 2018 and 2019, saying the struggling restaurant chain will have trouble cutting back labor costs any further than it already has. "We are downgrading Chipotle to Underperform from Neutral as we believe, assuming no significant tax reform, that 2018 and 2019 consensus EPS needs to drop at least 10 percent," analyst Gregory Francfort write in a note Wednesday. "We believe further gains from trimming hours will prove difficult which limits the opportunity to get labor below 27 percent of sales even if traffic recovers."

Chipotle keeps trying to cut labor its labor costs.

Chipotle has taken definitive steps to scale back its labor costs as sales decline. The average weekly hours for full- and part-time Chipotle crew members were cut from a high of 34.6 in 2006 to 21.7 in 2016, according to the report.

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