Bank of America Merrill Lynch downgraded Chipotle and warned investors that the stock will “underperform,” complaining that the restaurant chain is paying its workers too much, and that cutting labor costs further will be difficult for the chain.

“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 told CNBC 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.”

But Chipotle spokesperson Chris Arnold called Bank of America’s analysis “flawed and inaccurate,” adding that the restaurant chain hasn’t cut employee hours but recently increased hours in conjunction with the addition of queso to the menu.

“That analysis is making estimates and conclusions about our management practices over a 12-year time frame from 2006 to 2017,” Arnold told The Intercept. “Obviously, the scale of our business and labor wages have changed dramatically over that time frame. Drawing conclusions from 2006 and applying them as a directional change to our business over the past 12 months is simply flawed.”

The downgrade is a symptom of Wall Street’s maniacal obsession with labor costs.

The Bank of America analysis cut the 2017 earnings estimate from $7.60 to $7.40, and the 2018 estimate $10.50 to $9.50, according to the report. Meanwhile, Chipotle CEO Steve Ells raked in $15.7 million in 2016. Nonexecutives are not getting rich stuffing tortillas at Chipotle; the typical worker makes a little more than $9/hr.



“We continue to pay wages and offer benefits that are competitive and that reflect the priorities of our employees,” Arnold said. “And with a commitment to developing and promoting people from within, we are providing significant opportunities for advancement.”