(Bloomberg) -- Chipotle Mexican Grill Inc. reported third-quarter sales that fell just short of Wall Street’s expectations, highlighting the high bar to which investors are holding the chain after it’s outpaced many peers this year.
Same-store sales, which measures performance at locations open for at least 13 months, rose 6% in the quarter, according to a statement Tuesday. That’s below the average analyst estimate of 6.4%. The company also forecast fewer new restaurant openings for next year than analysts were anticipating.
The shares fell 5.5% at 9:33 a.m. in New York. The stock had advanced 32% this year through Tuesday’s close, outpacing the S&P 500 Index over the same period.
Chipotle’s performance is still enviable among restaurants, given that peers such as McDonald’s Corp. and Starbucks Corp. have reported several quarters of same-store sales declines. But investors have grown accustomed to eye-popping results from Chipotle, which has consistently managed to attract diners. The burrito chain’s pitch that it’s still a good deal has resonated, even as customers pull back from both fast-food chains and sit-down restaurants.
The company is seeing broad strength across all income groups, Chief Financial Officer Adam Rymer said in an interview. Discounts at fast-food chains, including McDonald’s $5 meal deal, haven’t stolen much traffic away from Chipotle, he said.
In the third quarter, the burrito chain reported growth in both transactions and average checks, helped by hype around its smoked brisket limited-time offer, even though it costs more than other items. That trend has “continued into the fourth quarter with accelerating transaction trends,” interim Chief Executive Officer Scott Boatwright said during the company’s call with analysts.
Chipotle said its food and packaging costs rose as a percentage of total revenue in the quarter, in part because of higher prices for avocados and dairy. It also used more ingredients to ensure “consistent and generous portions” after it faced accusations from customers online that it was skimping.
“We’ve seen strong improvement even through our social channels,” Boatwright said during the call. “It’s a reverse of what we saw earlier in the year,” he said, adding diners are “posting big burritos, big bowls” and are “really excited” about the bigger portions.
Chipotle is experimenting with several upgrades to speed up service, including a dual-sided grill that cooks chicken faster and more consistently. It’s also planning to roll out a produce slicer that will take the task of chopping onions — roughly 20 pounds on average per restaurant each day — off workers’ plates. The machines will be in all restaurants by next summer, Boatwright said on the call.
The company maintained its earlier full-year view that same-store sales will rise in the mid- to high-single digit range.
Other Restaurants
Other restaurant chains reported mixed results on Wednesday. Wingstop Inc. shares tumbled as much as 18%, the biggest intraday drop since March 2020, after third-quarter adjusted earnings per share missed analyst estimates. Expectations had been high ahead of the report, with shares up 44% for the year through Tuesday’s close.
Shares of Brinker International Inc. rose 4.4% after the company raised its profit guidance ahead of analyst expectations. The company said the Chili’s “Big Smasher” burger and “3 for Me” value combos are resonating well with diners. The company’s stock has more than doubled this year.
Shake Shack Inc. shares jumped 8.8% after a new workforce model lifted productivity. Changes including improved food flow in kitchens cut customer wait times to the lowest point in more than five years.
(Updates shares for Chipotle and adds competitor results in the final paragraphs.)
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