Chipotle rises on strong outlook & pricing power despite revenue, same-store sales miss

Alexandra Canal

Chipotle (CMG) reported its fiscal second quarter earnings on Tuesday after market close.

The restaurant chain's same-store sales came in on the lower end of its guidance (and below Wall Street's expectations), although outlook for the third quarter remained strong, causing shares to rise more than 8% in after-hours trading.

Revenue and adjusted earnings per share came in mixed as price increases for products like beef, avocados, tortillas, dairy, and paper, in addition to higher wages, weigh on margins.

Here are Chipotle's second quarter results compared to Wall Street's consensus estimates, as compiled by Bloomberg:

  • Revenue: $2.21 billion versus $2.25 billion expected

  • Adj. earnings per share (EPS): $9.30 versus $9.10 expected

  • U.S. same-store sales: 10.1% versus 10% to 12% increase expected

Restaurant level operating margin was 25.2%, an increase from 24.5% in the second quarter of 2021 — a positive sign for investors as costs surge across the food sector.

Food, beverage and packaging costs in the second quarter remained flat at 30.4% of total revenue compared to the second quarter of 2021.

For the third quarter, Chipotle expects comparable restaurant sales growth, including planned price increases in August "in the mid to high-single digits," to help offset rising costs.

The company raised menu prices by 4% in the first quarter of 2022 (on top of earlier price hikes in June 2021 and December 2021.)

Chipotle CEO Brian Niccol noted on the earnings call that, amid inflation, the company has seen a pullback from lower-income consumers, but "fortunately for Chipotle...the majority of our customers are a higher household income consumer."

In all of 2022, the company reiterated that it expects to add 235 to 250 new restaurant openings with staffing currently above 2019 levels.

A meal is seen in a Chipotle outlet in this photo illustration in Manhattan, New York City, U.S., February 7, 2022. REUTERS/Andrew Kelly
A meal is seen in a Chipotle outlet in this photo illustration in Manhattan, New York City, U.S., February 7, 2022. REUTERS/Andrew Kelly (Andrew Kelly / reuters)

Similar to last quarter, Chipotle benefitted from its growth in digital sales and online ordering, as well as its focus on alternative store formats like the Chipotlane, which offers drive-through and walk-up windows for digital order pickup.

Its loyalty program also continued to expand, now boasting 29 million members.

Digital demand accounted for 39% of total food and beverage revenue, while in-restaurant sales increased 35.9% for the quarter.

Although Chipotle's leadership team revealed that sales have slowed since May, restaurants in college towns (about 15% of total locations) have seen summer traffic levels revert to pre-pandemic levels.

According to foot traffic analytics platform Placer.ai, Chipotle has seen year-over-year (YoY) and year-over-three-year (Yo3Y) foot traffic gains — even as nationwide visits to fast-casual restaurants slow.

On a Yo3Y comparison basis, visits to Chipotle were up 15.6% and 16.7% in May and June 2022, respectively, while YoY visits were up 23.3% and 14.6% over that same time period.

Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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