A Chipotle restaurant and signage is on display on February 9, 2022 in Miami, Florida.
Joe Raedle | Getty Images
Chipotle Mexican Grill on Tuesday reported weaker-than-expected quarterly earnings and revenue as customers pulled back on restaurant spending.
“As we got around the holiday season, we just didn’t see that pop, that momentum, that we normally see… frankly, we started the quarter soft and we ended the quarter soft,” Chief Financial Officer Jack Hartung said on the conference call. of the company, comparing the decline in December to weaker retail sales at the time.
CEO Brian Niccol insisted the company has seen no pushback to higher prices for its burrito bowls and tacos, despite declining transactions for the second straight quarter. Executives blamed weak fourth-quarter traffic on an underperforming limited-time menu item, difficult comparisons to last year’s chest launch, and the weather.
According to Niccol, restaurant traffic trends have reversed heading into the new year and through January. Traffic last month grew year over year, he said. However, around this time last year, the company was reeling from a flurry of Covid infections that forced some locations to cut hours or temporarily close due to sick employees.
Chipotle shares fell about 5% during extended trading.
Here’s what the company reported for the fourth quarter, compared to what Wall Street expected, based on an analyst survey by Refinitiv:
- Profit per share: $8.29 adjusted versus $8.90 expected
- Gain: $2.18 billion versus $2.23 billion expected
It is the first time since Chipotle’s third-quarter report in 2017 that the company has failed to meet Wall Street’s estimates for both quarterly profit and revenue, according to data from Refinitiv.
The burrito chain reported fourth-quarter net income of $223.7 million, or $8.02 per share, up from $133.5 million, or $4.69 per share, a year earlier. Higher menu prices helped offset rising food costs as the company paid more for dairy products, tortillas, beans, rice and salsa in the period ended Dec. 31. Executives also said the company was spending more on sick pay and medical claims than expected.
Excluding certain legal fees, corporate restructuring costs and other items, Chipotle earned $8.29 per share.
The company’s same-store sales rose only 5.6%, falling short of StreetAccount estimates of 6.9% and coming in weaker than Chipotle’s own forecast at the end of October. The launch of the Garlic Guajillo Steak menu item during the quarter prompted customers to spend more but did not attract more customers to order it, executives said.
The company said it expects same-store sales growth of high single digits for the first quarter of 2023, based on January same-store sales growth of low double digits. Wall Street expected same-store sales to be 6.7% in the first quarter, according to StreetAccount estimates.
Net sales increased 11.2% to $2.18 billion in the fourth quarter. Digital sales accounted for more than a third of total sales. Menu prices increased 13.5% year over year.
The company plans to open between 255 and 285 new locations this year, including moving 10 to 15 restaurants to add a drive-thru lane.
Executives did not provide an outlook for same-store sales growth in 2023, pointing to the possibility of a recession, but said same-store sales are likely to moderate in the second and third quarters. Last month, Chipotle said it plans to hire 15,000 employees by this spring, ahead of its busiest time of the year.
Chief Financial Officer Hartung said the company is not planning any further price increases this year.
