Chipotle investors feel like they’ve received a bowl of guac without the chips to eat it with. That’s because its quarterly earnings beat expectations, but sales missed. That starkly contrasts the stock’s post-earnings gap that sent shares to all-time highs in May. 😬
Today the fast-casual restaurant chain reported $12.65 in adjusted earnings per share on $2.51 billion in revenues. Analysts had expected $12.31 and $2.53 billion in revenues. With that said, same-store sales of 7.4% were 0.1 percentage points shy of expectations. 🔻
As for restaurant-level operating margins rose from 25.2% one year ago to 27.5%. Lower avocado prices helped, but the company is still experiencing higher prices for other key ingredients. The company also said last quarter that it’s done raising prices, so margin expansion must come from cost reduction. 🔺
However, CEO Brian Niccol walked back those comments today, saying, “As we get closer to the fourth quarter, we’ll make a decision exactly on what we want to do on the pricing front.”
Executives say they’re focused on improving restaurant efficiency through training and equipment upgrades. Its goal is to serve more customers during peak times. Meanwhile, digital sales continue growing, accounting for 38% of the company’s food and beverage revenue. 📲
Looking ahead, Chipotle reiterated its full-year forecast for same-store sales growth in the mid-to-high-single-digit range. It does expect low-to-mid-single digits in the third quarter, though.
Expectations were high, with prices trading just below all-time highs ahead of the release. Unfortunately for investors, the revenue and same-store sales miss was enough to cause a selloff. $CMG shares are currently down 9% to three-month lows. 👎
