Blizzards and subzero temperatures couldn’t deter diners from getting their burrito fixes.
Chipotle Mexican Grill Inc. today posted first-quarter revenue that topped analysts’ estimates and raised its forecast for sales at its established stores, allaying concerns that the chain’s rapid growth would slow amid harsh winter weather and fierce restaurant competition. The chain, however, is seeing its ingredient costs climb and is raising menu prices.
Sales in the quarter through March rose 24 percent, the largest quarterly gain in two years, to $904.2 million, the Denver-based company said today in a statement. Analysts projected $873.5 million, on average. Sales at stores open at least 13 months jumped 13.4 percent. Analysts estimated an 8.8 percent increase, according to Consensus Metrix.
“There is probably less of a weather-related issue for the chain because they have a high concentration of millennial customers, and I think they are a little more impervious to weather,” Stephen Anderson, an analyst at Miller Tabak & Co. in New York, said in an interview. Catering and Chipotle’s new meat substitute, sofritas, also helped drive sales in the quarter, he said.
Chipotle, which has been accelerating new store growth, is trying to boost sales with catering services and by adding new restaurants, such as ShopHouse Southeast Asian Kitchen and a pizzeria, to its stable of brands. The chain, which has about 1,600 locations, also is experimenting with mobile payments to attract more customers.
The company raised its forecast for 2014 comparable-store sales growth to a high-single digit percentage rate, compared with a previous projection for a gain in the low-to-mid-single digits.
Profit trailed estimates as Chipotle paid more for beef, avocados and cheese. First-quarter net income increased 8.5 percent to $83.1 million, or $2.64 a share, from $76.6 million, or $2.45 a share, a year ago. Analysts estimated $2.87, the average of 26 estimates compiled by Bloomberg.
The shares fell 5.9 percent to $519.61 at the close in New York after earlier rising as much as 6.6 percent. They have lost 2.5 percent this year, while the Standard & Poor’s 500 Restaurants Index declined 1.8 percent.
The price for burritos is going up. Chipotle menus will see a mid-single-digit percent price increase by early in the third quarter, Chief Financial Officer Jack Hartung said today on a conference call. That’s to help make up for surging meat and dairy prices, which are contributing to the fastest gain in consumer food costs since 2011, government data show.
Chipotle’s ingredient costs were 34.5 percent of revenue in the first quarter, a 1.5 percentage-point increase from a year ago. Steak prices are up 25 percent since the fourth quarter, Hartung said.
Limited-service restaurants have been outperforming sit-down eateries. Last year, sales at limited-service chains, including fast food and fast casual chains, rose 3.5 percent, compared with 2.8 percent growth for full-service restaurants, according to data from industry researcher Technomic Inc. in Chicago.