(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 4.4% at 6:18 p.m. in extended New York trading. The stock advanced 32% in 2024 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.
(Updates share trading. Adds commentary from CFO in fifth paragraph, and details on productivity efforts in ninth paragraph.)
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