Chipotle Mexican Grill misses expectations for earnings, revenue and same-store sales

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  • Chipotle Mexican Grill reported lower-than-expected earnings and earnings for the fourth quarter.
  • CEO Brian Niccol said the company didn’t face a backlash from price hikes on its burrito and taco bowls, despite shrinking deals.
  • The company plans to open 255 to 285 new offices in 2023 and said last month it plans to hire 15,000 employees by spring.

Chipotle Mexican Grill reported weaker-than-expected quarterly earnings and earnings on Tuesday as customers cut their spending on restaurants.

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“As we approached the holidays, we just didn’t see the surge, the momentum that we usually see…to be honest, we started the quarter soft and we ended the quarter soft,” said Chief Financial Officer Jack Hartung. the company’s teleconference, comparing December’s decline with weaker retail sales at the time.

CEO Brian Niccol said the company didn’t face a backlash from price hikes on its burrito and taco bowls, despite declining deals for the second straight quarter. Executives blamed weak fourth-quarter traffic on an underperforming time-limited menu item, harsh comparisons to last year’s brisket launch, and weather conditions.

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However, according to Nikcol, restaurant attendance trends have changed in the new year and in January. According to him, the traffic in the last month increased year on year. However, at the same time last year, the company was experiencing a wave of Covid infections, which caused some offices to reduce hours of operation or temporarily close due to sick employees.

Chipotle shares fell about 5% in extended trading.

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Here’s what the company said fourth quarter, compared to what Wall Street expected, based on a Refinitiv poll of analysts:

  • Earnings per share: $8.29 adjusted vs $8.90 expected
  • Income: $2.18 billion vs. expected $2.23 billion

For the first time since Chipotle’s Q3 2017 report, the company fell short of Wall Street’s estimates for both quarterly earnings and revenue, according to data from Refinitiv.

Burrito Chain reported fourth-quarter net income of $223.7 million, or $8.02 per share, up from $133.5 million, or $4.69 per share, a year earlier. Higher menu prices helped offset rising food prices as the company paid more for dairy, tortillas, beans, rice and salsa during the period ended Dec. 31. Executives also said the company spent more than expected on sick pay and medical claims.

Excluding certain legal expenses, corporate restructuring costs and other items, Chipotle earned $8.29 per share.

The company’s same-store sales rose just 5.6%, below StreetAccount’s estimate of 6.9% and below Chipotle’s own late-October forecast. The launch of the Garlic Guajillo Steak menu item during the quarter encouraged customers to spend more but didn’t get them to order, executives said.

The company said it forecast same-store sales growth in high single digits in the first quarter of 2023, based on January same-store sales growth in low double digits. StreetAccount estimated that Wall Street expected first-quarter same-store sales to be 6.7%.

Net sales rose 11.2% to $2.18 billion in the fourth quarter. Digital sales accounted for over a third of total revenue. Menu prices rose 13.5% year on year.

The company plans to open 255 to 285 new locations this year, including relocating 10 to 15 restaurants to add the lane.

Executives did not provide a forecast for same-store sales growth in 2023, noting the possibility of a recession, but said that same-store sales were likely to decline in the second and third quarters. Last month, Chipotle said it was looking to hire 15,000 employees by spring, ahead of the busiest time of the year.

Head of Finance Hartung said the company does not plan further price increases this year.

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