Chipotle announces it is raising prices again
Yahoo Finance Live anchors discuss second-quarter earnings for Chipotle.
Video Transcript
- From tech to food, it's not just guac that's going to cost you extra at Chipotle now. The fast casual chain announced it is raising prices again in August, this after Chipotle raised prices in the second quarter to spur profit growth despite a pullback in visits from lower income shoppers. CEO Brian Niccol isn't losing sleep over the loss of customers, though, saying on the company's earnings call that the majority of its customers are higher income households.
So interesting here, you have Chipotle pushing through more price increases in August. That's what they do. They have historically been very measured in price increases. But looks like now that floodgate is open, and now, they are, I think, going to really be tested to see how much value the consumer sees in their product. Now by and large, Chipotle has been able to pass through price increases very successfully. And you're seeing that being rewarded, I believe, in the stock price here this morning.
The market really likes to hear these August price increases. But how much are you willing to pay? And I have a graphic here. Last night, I ordered Chipotle. There is my bill. Yes, I got double meat. I got double steak. I got double chicken. I get it. And I got it delivered so I have to pay an extra fee. But my two salad bowls cost over $60. And sorry folks, my credit card number is not on there so don't even go try to screen grab it.
- Did you house both of those salads?
- Yes, that is my dinner. That's what I eat. I can eat large quantities of food. But still, over $60 for my two salad bowls, I think the extra meat was $6.90. That's tough. And I love Chipotle, but I am now at that point do I cut back on a bowl? Do I just not go to Chipotle as much? I'm at that point right now.
- You were part of the digital sales no.
- Yes.
- They honestly-- and our producer Alex is saying you're a cheap tipper, though.
- That was 15%.
- It was 15%, yeah.
- Well, restaurant, the operating margin that they see at the restaurants right now in this most recent quarter, 25.2% here. And this is noteworthy because, at a time where they are going to still filter through costs to the consumers, keep a close eye on the margins going forward from here. This was an increase of 70 basis points. But for me, who has been a longtime Chipotle customer, I've started to pull back on how much I spend at Chipotle.
And I've noticed this year over year, and I can go all the way back to what I remember spending for a burrito in college, which was 12 bucks. Now, it's like 15. You can't get out the door without paying 15 bucks to $16 for a burrito.
- Right, and maybe consumers are starting to realize this. So Chipotle did note in the conference call same sort of sales early on so far in the third quarter up mid-single digits to high single digit percentage. So traffic may be slowing down a little bit as consumers bump up against those price increases, but still, we'll talk more about this with Chipotle CFO Jack Hartung later on the show. And Alex, I'm a very good tipper, OK. That was 15%. That was very good. OK, I'm just going to leave it there.
- We'll have to get the--
- I'm a very good tipper. Ask anyone.