Chipotle Mexican Grill on Tuesday reported weaker-than-expected quarterly earnings and revenue as it said customers pulled back on their restaurant spending.
“As we got around the holidays, we just didn’t see that pop, that momentum, that we normally see … frankly, we started the quarter soft, and we ended the quarter soft,” CFO Jack Hartung said on the company’s conference call, comparing the decline in December to weaker retail sales at that time.
CEO Brian Niccol maintained that the company hasn’t seen backlash to higher prices for its burrito bowls and tacos, despite declining transactions for the second consecutive quarter. Executives blamed weak traffic in the fourth quarter on an underperforming limited-time menu item, tough comparisons to the previous year’s brisket launch, and weather.
Restaurant traffic trends have reversed heading into the new year and through January, though, according to Niccol. Traffic last month grew year over year, he said. However, this time last year, the company was reeling from a wave of Covid infections that caused some locations to shorten hours or temporarily close due to sick employees.
Chipotle shares fell roughly 5% in extended trading.
Here’s what the company reported for the fourth quarter, compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: $8.29 adjusted vs. $8.90 expected
- Revenue: $2.18 billion vs. $2.23 billion expected
It’s the first time since Chipotle’s third-quarter report in 2017 that the company has fallen short of Wall Street’s estimates for both its quarterly earnings and revenue, according to Refinitiv data.
The burrito chain reported fourth-quarter net income of $223.7 million, or $8.02 per share, up from $133.5 million, or $4.69 per share, a year earlier. Higher menu prices helped offset rising food costs as the company paid more for dairy, tortillas, beans, rice and salsa during the period, ended Dec. 31. Executives also said the company handed out more in sick pay and medical claims than expected.
Excluding certain legal expenses, corporate restructuring costs and other items, Chipotle earned $8.29 per share.
The company’s same-store sales rose just 5.6%, falling short of StreetAccount estimates of 6.9% and coming in weaker than Chipotle’s own forecast from late October. The launch of the Garlic Guajillo Steak menu item during the quarter pushed customers to spend more, but didn’t attract more customers to order, executives said.
The company said it’s projecting same-store sales growth in the high-single digits for the first quarter of 2023, based on January same-store sales growth in the low double-digits. Wall Street was anticipating first-quarter same-store sales of 6.7%, according to StreetAccount estimates.
Net sales climbed 11.2% to $2.18 billion for the fourth quarter. Digital sales represented more than a third of its total revenue. Menu prices were up 13.5% year over year.
The company plans to open between 255 and 285 new locations this year, including relocating 10 to 15 restaurants to add a drive-thru lane.
Executives did not provide an outlook for 2023 same-store sales growth, noting the possibility of a recession, but said that same-store sales will likely moderate in the second and third quarter. Last month, Chipotle said it is looking to hire 15,000 workers by this spring, ahead of its busiest time of the year.
CFO Hartung said the company doesn’t plan to raise its prices further this year.