Chipotle Mexican Grill on Tuesday released quarterly results that beat analysts’ expectations on the strength of its latest round of menu price hikes.
CEO Brian Niccol said the company saw “minimal resistance” to rising menu prices during the quarter, although transactions were down 1%. Even with the price hikes, he noted that the average price of a bowl of chicken burrito, which accounts for about half of US orders, is still under $9.
Here’s what the company reported compared to what Wall Street expected, based on a Refinitiv analyst survey:
- Earnings per share: $9.51 adjusted vs. $9.21 expected
- Revenue: $2.22 billion vs. $2.23 billion expected
Net sales increased 13.7% to $2.22 billion from the prior year period, fueled by comparable store sales growth of 7.6% and new store openings. Analysts polled by StreetAccount expected comparable store sales to increase by 7.3%.
Like other restaurant companies, Chipotle has raised menu prices because it pays more for ingredients. The chain said lower-income consumers visit less frequently, but most of its customer base is in a higher income bracket. This trend accelerated this quarter, hampering the company’s traffic.
Customers order at a Chipotle restaurant in the King of Prussia Mall in King of Prussia, Pennsylvania.
Mark Makela | Reuters
“We’re seeing trades pushed into this negative range and obviously we’ll continue to keep an eye on that as we move forward,” Niccol told analysts on the company’s conference call Tuesday.
He added, however, that diners weren’t giving up on paying extra for guacamole or switching from steak to chicken.
Chipotle raised prices in August for the third time in 15 months, pushing them up 13% from the third quarter of 2021. Earlier in October, it raised prices for the fourth time at about 700 locations, which accounts for more than a fifth of its footprint. Executives said the latest cycle was driven by pockets of wage inflation in some markets.
For the period ended Sept. 30, in-restaurant sales climbed 22.1%, signaling that customers are returning to Chipotle locations to order their burritos and tacos.
This trend continued to hurt digital sales, which only accounted for 37.2% of revenue. But Chipotle’s earnings benefited from fewer delivery orders, for which the company pays fees to third parties.
The burrito chain reported third-quarter net income of $257.1 million, or $9.20 per share, from $204.4 million, or $7.18 per share, a year earlier. The company said it pays more for dairy, tortillas, avocados, wrappers and labor.
Excluding $3.5 million in severance costs related to employee departure, corporate restructuring and other items, Chipotle earned $9.51 per share.
Chipotle shares were down more than 2% in extended trading on Tuesday.
The chain opened 43 new locations during the quarter and all but five included a “Chipotlane”, drive-thru lanes reserved for picking up digital orders.
Chipotle’s board of directors approved an additional $200 million to repurchase its shares during the period.
For the fourth quarter, Chipotle expects same-store sales growth in the mid to high single digits. By the end of the year, he plans to open 235 to 250 new restaurants. For 2023, the company plans 255 to 285 openings.