A Chipotle restaurant in New York on July 3, 2023.
Jeenah Moon | Bloomberg | Getty Images
Chipotle Mexican Grill on Wednesday reported quarterly earnings and revenue that topped analysts’ expectations as it saw higher traffic at its restaurants, bucking an industry slowdown.
Shares of the company rose about 13% in extended trading before losing most of those gains and settling around 3% higher. As of Wednesday’s close, Chipotle’s stock had slid 17% this month, hurt by investor concerns about the health of the restaurant industry. In late June, the company executed a 50-for-1 stock split.
Here is what the company reported for the quarter that ended in June 30 compared to what Wall Street was expecting, based on a survey of analysts by LSEG:
- Earnings per share: 34 cents adjusted vs. 32 cents expected
- Revenue: $2.97 billion vs. $2.94 billion expected
The burrito chain reported second-quarter net income of $455.7 million, or 33 cents per share, up from $341.8 million, or 25 cents per share, a year earlier. Chipotle’s profits rose from the year-ago period due to price hikes that helped offset higher avocado prices and greater usage of oil to fry tortilla chips this quarter.
Excluding items, Chipotle earned 34 cents per share.
Net sales climbed 18.2% to $2.97 billion.
The company’s same-store sales rose 11.1% in the quarter, topping StreetAccount estimates of 9.2%.
Demand for its food peaked in April, CEO Brian Niccol said on CNBC’s “Closing Bell: Overtime” on Wednesday. Same-store sales settled around 6% higher in June. Executives said that July has been more difficult to underst and, given the Fourth of July holiday, weather disruptions in Texas and a recent tech outage.
Traffic to its restaurants increased 8.7% despite backlash on social media fueled by customers who said their burrito bowls are smaller. The company has denied reducing its portions but is now training its employees to ensure that customers will be happy with the size of their burrito bowls, which will put some pressure on profit margins.
“We have focused in on those with outlier portion scores based on consumer surveys, and we are re-emphasizing training and coaching around ensuring we are consistently making bowls and burritos correctly,” Niccol told analysts on the company’s conference call. “We have also leaned in and re-emphasized generous portions across all of our restaurants, as it is a core brand equity of Chipotle.”
The company is also gaining market share, and restaurant transactions grew across every income level, Niccol said. Other consumer companies, from PepsiCo to McDonald’s, have said in recent months that low-income customers are pulling back more, pressuring their sales. Chipotle, similar to many fast-casual chains, benefits from a customer base that tends to make higher incomes.
The chain brought back its chicken al pastor in March as a limited-time menu item. More customers have also been ordering its barbacoa, which underwent a name change earlier this year that added “braised beef” to improve customer awareness of the option.
Chipotle opened 52 new company-owned locations and one new international licensed restaurant during the quarter.
The company reiterated its full-year outlook that same-store sales will grow by a mid- to high-single-digit percentage. Chipotle also anticipates that it will open between 285 and 315 new restaurants this year.
