Chipotle Mexican Grill on Tuesday reported quarterly results that beat analysts’ expectations as another round of price hikes was on the menu.
CEO Brian Niccol said the company saw “minimal resistance” to higher menu prices during the quarter, although transactions fell 1%. Even with the price increases, he noted that the average price for a chicken burrito bowl, which accounts for about half of US orders, is still below $9.
Here’s what the company reported compared to what Wall Street expected, based on a survey of analysts by Refinitiv:
- 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, driven by 7.6% same-store sales growth and new store openings. Analysts polled by StreetAccount expected a 7.3% increase in sales in the same store.
Like other restaurant companies, Chipotle has increased menu prices because it pays more for ingredients. The company has said lower-income consumers are less likely to visit, but the majority of its customer base is in higher-income brackets.
“We see trades being pushed into that negative range and will obviously continue to monitor this,” Niccol told analysts on Tuesday during the company’s conference call.
He added that diners don’t choose to pay extra for guacamole or switch from steak to chicken.
Chipotle raised prices in August for the third time in 15 months, pushing them 13% higher than the same period a year ago. Earlier in October, it raised prices for a fourth time at about 700 locations, representing more than a fifth of its footprint. Executives said the latest round was due to wage inflation in certain markets.
For the period ended Sept. 30, restaurant sales were up 22.1%, indicating customers are returning to Chipotle locations to order their burritos and tacos.
That trend has continued to hurt digital sales, which accounted for just 37.2% of revenue. But Chipotle’s profits have benefited from the reduced number of delivery orders, for which the company pays commissions to third parties.
The burrito chain reported third-quarter net income of $257.1 million, or $9.20 per share, up from $204.4 million, or $7.18 per share, a year earlier. The company reported paying more for dairy, tortillas, avocados, packaging and labor.
Excluding $3.5 million in divorce costs related to an employee’s departure, corporate restructuring and other items, Chipotle earned $9.51 per share.
Shares of Chipotle were up about 2% in aftermarket trading.
The restaurant business opened 43 new locations during the quarter. All but five of them featured a “Chipotlane,” drive-thru lanes reserved for digital order pickup.
Chipotle’s board approved an additional $200 million to repurchase its shares during the period.
For the fourth quarter, Chipotle forecasts same-store sales growth in the mid-to-high single digits. By the end of 2022, it expects to open between 235 and 250 new restaurants. For 2023, the company expects 255 to 285 new locations.