The stock of Chipotle Mexican Grill (NYSE:CMG) is rising as of late Tuesday afternoon after the burrito chain’s second-quarter earnings exceeded forecasts and its third-quarter outlook exceeded expectations. Although its CEO claims that its price points are the best among businesses committed to using clean, healthy foods, it may not be the first name that springs to mind when considering value in the restaurant industry.
Chipotle (CMG) reported earnings of $9.30 per adjusted share on revenue of $2.2B, up 17% year over year. Analysts anticipated $2.25B in revenue and $9.03 in EPS. In contrast, the same period a year prior had an EPS of $7.46 and revenue of $1.9B.
Just behind the average forecast of 10.9%, Chipotle reported same-restaurant sales growth of 10.1%.
The business anticipates third-quarter same-restaurant sales growth to climb in the mid-to-high-single digits, including anticipated pricing hikes in August. The majority recommends a 6.9% rise.
Chipotle anticipates opening between 235 and 250 new locations overall, with up to 15 of those sites moving to make room for Chipotlane drive-throughs.
After trading 0.9% lower during Tuesday’s regular session, Chipotle is up 8.3% to $1,415 in after-hours trading.
Before the general market, the share price of Chipotle decreased by around 24% this year. Recent concerns that inflation and the economy will restrain restaurant spending have harmed the pandemic standout.
Therefore, positive profitability and the company’s ability to meet average analyst comp projections for the current quarter were promising developments despite somewhat reduced sales. This morning, the information was released after the world’s largest fast-food chain, McDonald’s (MCD), exceeded expectations by reporting earnings despite challenges.
Following the findings, Chief Executive Brian Niccol talked with Barron’s, saying that among all the ambiguity, he hopes people would remember “the resiliency of the Chipotle brand.”
Inflation, according to Niccol, is still a worry because it reduced consumer buying power and dragged on otherwise rising restaurant margins in the quarter. However, Niccol contends that Chipotle is in an advantageous position. “The culinary [experience] and the food we provide at the price it provides is a point of differentiation and competitive advantage. You’d be hard pressed to create this food at home as cheaply, and when we look at competitors with the same commitments, we’re lower priced; they’re in the $15 range, and we’re in the $10 range.”
Given this, he is convinced that anticipated price rises will allow the business to continue to manage pressures without affecting demand. According to Niccol, Chipotle is “relevant to a lot of different income levels,” and many higher-income consumers are switching from other restaurants to Chipotle.
According to analytics company Placer.ai data, Chipotle visits increased 14.6% in June compared to the same month last year, while fast-casual restaurants saw visits decline by 0.1%.
According to Niccol, Chipotlanes’ ongoing success demonstrates that their popularity wasn’t merely a Covid fluke and continues to impact the company’s digital orders significantly. He also emphasizes the company’s achievements in the UK and Canada, where Chipotle started its rewards program just over a month ago.
He asserts that Meati Foods’ plant-based proteins made from mushroom root, which the business has invested in, will ” be a part of how people want to eat in the future. We need to find [plant-based] culinary options that match our food ethos to be a true alternative to ordering beef or chicken.”
Featured Image: Megapixl © Bigapplestock
