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Chipotle Reports Strong Quarterly Earnings, Aided by Menu Price Increases

Chipotle Mexican Grill announced quarterly earnings that exceeded expectations, driven by heightened menu prices for its burritos and bowls. Following this news, the company’s shares surged more than 2% during extended trading.

Here’s the company’s performance compared to the consensus estimates of Wall Street analysts, based on data from LSEG, formerly known as Refinitiv:

Earnings per share: Adjusted earnings of $11.36 versus an anticipated $10.55
Revenue: $2.47 billion, aligning with expectations

In the third quarter, the burrito chain disclosed a net income of $313.2 million, equivalent to $11.32 per share, representing an increase from the previous year’s figures of $257.1 million, or $9.20 per share. Chipotle’s adjusted earnings per share reached $11.36 after accounting for corporate-restructuring expenses.

This quarter, beef and queso costs experienced an uptick, largely offsetting the menu price increases from the previous year. Earlier in the month, the restaurant chain raised its menu prices for the first time in over a year, citing inflation.

Earlier this year, the company had temporarily halted its aggressive price hikes due to consumer spending contraction. Nevertheless, the company’s executives have affirmed their belief in Chipotle’s pricing power and its capacity for further increases.

CFO Jack Hartung commented on the company’s conference call, highlighting the attractiveness of Chipotle’s value, especially since prices had remained unchanged for over a year until the recent adjustments. He noted that people opt for Chipotle due to its affordability.

In California, customers can anticipate additional price increases for their burritos in the upcoming year. This decision is in response to California’s plan to raise the minimum wage for fast-food workers to $20 per hour in April, leading to higher labor costs. Approximately 15% of Chipotle’s restaurants are located in California.

CEO Brian Niccol noted that October has seen robust traffic trends, thanks in part to the reintroduction of carne asada as a limited-time menu item.

During the quarter, Chipotle opened 62 new restaurants, with all but eight of them featuring a “Chipotlane,” a designated drive-thru lane for digital order pickups.

Looking ahead to 2024, the company anticipates the opening of 285 to 315 new restaurants.

Chipotle has reiterated its forecast for same-store sales growth in the mid-to-high single-digit range for 2023.

Significant Terms Defined:

  • Inflation: The increase in the prices of goods and services over time, resulting in a decrease in the purchasing power of a currency.
  • Corporate-Restructuring Expenses: Costs incurred as part of reorganizing or reshaping a corporation’s operations or structure.
  • Pricing Power: A company’s ability to raise prices for its products or services without significantly impacting consumer demand.

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