Chipotle Mexican Grill Inc.’s second-quarter sales fell just short of Wall Street’s expectations and its third-quarter outlook disappointed investors, sending the shares on their steepest drop since 2020.
(Bloomberg) — Chipotle Mexican Grill Inc.’s second-quarter sales fell just short of Wall Street’s expectations and its third-quarter outlook disappointed investors, sending the shares on their steepest drop since 2020.
The results, released Thursday, show the company may need more work to maintain the rapid growth that shareholders have grown accustomed to. While Chipotle has revitalized its performance in recent years and added new menu items, such as a chicken al pastor limited-time offer, some analysts had expected the company to outperform the market’s expectations.
“Not surprisingly, investor expectations were high into earnings, and the mixed 2Q23 result fell short,” Barclays analysts led by Jeffrey Bernstein wrote in a research note.
The shares fell as much as 9.1% on Thursday in New York trading, the biggest intraday drop since March of 2020. The stock had advanced 50% in 2023 through Wednesday’s close, exceeding the S&P 500 Index’s 19% gain.
The key measure of same-store sales rose 7.4% in the second quarter, trailing the average analyst estimate of 7.7%. Chipotle sees that metric rising in the “low-to-mid-single-digit range” in the third quarter, implying a slowdown from the previous period and below the market’s expectations.
For the full year, Chipotle continues to see comparable sales growing in the mid-to-high-single-digit range. The company expects to open as many as 285 new restaurants.
Restaurant operating margins rose from year-ago levels because of rising sales and lower avocado prices. Chief Financial Officer Jack Hartung told analysts the company is switching to sourcing avocados from Peru in a bid to avoid “volatility in the Mexican avocado market.”
Chipotle’s second-quarter earnings were $12.65 a share, excluding some items, while analysts expected $12.25.
On the call to discuss the earnings, Chief Executive Officer Brian Niccol said the company isn’t seeing customers pulling back.
“We’re not seeing any weakness in the lower-income consumer,” Niccol said. “If anything, they’ve continued to improve, and we’re feeling really good about the value proposition we’re providing all income levels.”
–With assistance from Reade Pickert.
(Updates share trading and adds analyst comment)
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