Chipotle Sales Beat Estimates, But Delivery Costs Climb

(Bloomberg) -- Chipotle Mexican Grill Inc., the best performer in the S&P 500 Index this year, is maintaining its torrid pace of growth -- but concerns about the rising cost of wages and delivery are starting to weigh on the company.

• The key gauge of same-store sales rose 11% in the third quarter -- the ninth straight gain. Analysts had estimated 9.3%, according to Consensus Metrix. The company said it sees full-year comparable sales at the high end of its previous forecast, which is for growth in the high-single digits.

Key Insights

• Chipotle is getting results from digital and delivery, along with increased traditional advertising. The company also has been investing in pick-up shelves to speed up to-go orders. Digital sales increased 88%, the company said.
• All the growth comes with a price, however. The burrito seller said delivery costs weighed on margins in the quarter, and the higher expense isn’t going away as more diners opt for convenience. While Chipotle is working with DoorDash and Postmates, others are rushing to add delivery, too, making it a hyper-competitive category.
• Chipotle said its target for new locations this year will be at the low end or slightly below its previous guidance for 140 to 155 stores. Some are being delayed into 2020 because the company is adding pick-up windows.
• Costs were higher for several ingredients, the company said, highlighting beef in particular. Wage inflation also increased. On a conference call with analysts, Chipotle executives said they see commodity prices stable next year.

Market Reaction

• The stock fell as much as 1.9% to $815.05 in late trading, reversing an earlier gain. Through the close, Chipotle’s stock has nearly doubled this year.
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To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder

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