Chipotle Misses Sales Expectations in Q3

By Juveria Tabassum and Waylon Cunningham

(Reuters) – Chipotle Mexican Grill on Tuesday reported a third-quarter same-store sales growth that fell short of market expectations due to higher menu prices impacting demand. Increased costs of ingredients like avocados and dairy also pressured margins.

Shares dropped about 4% in extended trading as the company maintained its annual growth target for comparable restaurant sales in the mid to high single-digit range.

U.S. restaurant chains are facing subdued demand as consumers cut back on spending for pricier menu items in favor of deals.

However, Chipotle's strong demand for its popular burritos, rice bowls, and tacos has allowed it to withstand some challenges unlike rivals such as McDonald's.

Following Brian Niccol's unexpected resignation to become CEO of Starbucks, Chipotle appointed Scott Boatwright as interim CEO in August. Executives noted concerns regarding the transition during a post-earnings call.

Despite these challenges, Chipotle's comparable sales rose 6% in the third quarter, slightly below analysts' expectations of a 6.3% increase.

Commodity price hikes in beef, dairy, and avocados took a toll on restaurant-level margins, which decreased by about 80 basis points year-over-year. CFO Adam Rymer mentioned low single-digit inflation on sales costs.

To tackle these input cost pressures, Chipotle is investing in in-store efficiencies, including kitchen automation and AI to enhance its loyalty program.

Excluding certain items, the company's earnings per share of 27 cents surpassed forecasts by 2 cents.