A customer exits a Chipotle Mexican Grill in Martinez, California, U.S. (Photographer: David Paul Morris/Bloomberg)

Chipotle’s Sales Accelerate, But Wall Street’s Hungry for More

(Bloomberg) -- Chipotle Mexican Grill Inc. posted same-store sales acceleration for a fifth consecutive quarter -- but higher costs related to wages, delivery and advertising represent a challenge for the burrito chain.

  • The Mexican restaurant chain reported comparable sales growth of 9.9 percent last quarter, beating the estimate for a 7.3 percent increase from Consensus Metrix.

Key Insights

  • Investors have cheered Chief Executive Officer Brian Niccol’s efforts to revamp the burrito chain, but his honeymoon may be coming to an end -- especially since the stock has already doubled in value over the last 12 months.
  • In addition to cleaning up the basics with better advertising and operations, Niccol is rushing to improve digital, expand delivery and offer more trendy items like Keto-diet friendly bowls. Digital sales doubled in the quarter, accounting for almost 16 percent of revenue.
  • Chipotle is facing higher labor costs as minimum-wage increases take hold across the U.S. The company is especially sensitive to pay hikes because it owns its restaurants and doesn’t franchise.
  • The company is spending more on marketing this year to boost its brand image and encourage more digital orders. In March, Chipotle took its new loyalty program national.
Chipotle’s Sales Accelerate, But Wall Street’s Hungry for More

Market Reaction

  • The shares alternated between losses and gains in late trading in New York, and were little changed as of 4:30 p.m. They have gained 64 percent this year through Wednesday’s close.

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