Chipotle Mexican Grill (NYSE:CMG) surpassed market expectations for quarterly sales on Tuesday, as Americans continued to indulge in its burritos and rice bowls despite the uptick in menu prices, highlighting its resilience in a volatile macroeconomic landscape.
Shares of the California-based company rose approximately 3% in extended trading.
While the U.S. restaurant industry has witnessed a decline in customer traffic over the past few months, Chipotle has defied this trend, partly due to its clientele consisting of higher-income individuals who were relatively less affected by persistent inflation.
Data from Placer.ai revealed that traffic at Chipotle’s U.S. locations increased by 2.6% in October and further strengthened, culminating in a 5.5% surge in December alone, whereas the overall fast-food industry experienced an average decline of 1.6% in visits.
This growth persisted even after Chipotle implemented a 3% menu price hike in October following a prolonged hiatus. While the price adjustments contributed to higher sales by elevating average order values, enhancements in in-store efficiency also played a role in attracting more customers.
Chipotle highlighted that customer transactions in the quarter ended December 31 increased by 7.4% compared to the previous year, with the average amount spent per order rising by 1%.
Despite facing increased costs for certain ingredients like beef and queso, the company benefited from moderating costs of other commodities such as paper and certain vegetables in recent months, thereby bolstering margins. It reported a restaurant-level operating margin of 25.4% in the fourth quarter, up from 24% a year earlier.
Comparable sales at Chipotle rose by 8.4% in the quarter, surpassing analysts’ average estimate of a 6.96% increase, according to LSEG data.
Looking forward, the company anticipates mid-single-digit growth in comparable restaurant sales for 2024, compared to analysts’ average estimate of a 5.34% increase. Additionally, Chipotle plans to open 285 to 315 new restaurants this year.
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