Chipotle Misses Profit As High Prices Bite Into Delivery Orders, Traffic

By Dave Simpson
Chipotle Misses Profit As High Prices Bite Into Delivery Orders, Traffic

Chipotle Mexican Grill Inc has missed quarterly comparable sales and profit expectations, as customers pulled back on expensive delivery orders and traffic stalled in December.


Sales of Chipotle's burritos and bowls have surged through most of the COVID-19 pandemic, but investors are now watching consumer companies for sagging traffic and other signs of slowdown. If customers pare spending, it could be a sign that the United States is headed toward a recession.

Persistently high inflation across product categories has caused even some affluent diners to look for cheaper options such as McDonald's.

Comparable sales at California-based Chipotle rose 5.6% in the fourth quarter ended 31 Dec, while analysts on average expected a 7.1% rise, according to Refinitiv IBES.

The chain reported profit of $8.29 per share, an increase of 48.6%. Analysts on average expected profit of $8.90.


Visits to Chipotle restaurants fell 10.2% in the fourth quarter, according to data from McDonald's visits rose 29.4% in the same period.

Even so, Chipotle continued to enjoy steady demand for its pricier menu items from its relatively wealthier customer base, Chipotle chief executive officer Brian Niccol said during a call with investors.

"We continue to see the higher-income consumer, the individual that earns over $100,000, coming more often," Niccol said. "We made the decision not to go chasing people with discounts. That's not what our brand is."

Traffic also turned positive at the end of the quarter and continued to grow in January, he said.

Niccol said the chain's Garlic Guajillo Steak provided a "lower-than-expected benefit" during the fourth quarter after it expanded across the United States and Canada.


Delivery transactions also tumbled 15% as in-store orders surged, and Chipotle restaurants "didn't see that pop" that they normally get in December around the holidays, Chief Financial Officer Jack Hartung said on the call.

Chipotle forecast comparable sales growth in the high-single digits for the current quarter and said it expects to open 255 to 285 new restaurants in 2023.

It did not provide longer-term projections because "we don't know what's going to happen in the economy. We think inflation will be reasonably tame," Hartung said, adding that the company had not yet decided whether to raise menu prices further in 2023.

Revenue rose to $2.18 billion from $1.96 billion in the quarter, missing estimates of $2.23 billion.

Falling prices for avocados, along with higher menu prices, helped the chain reduce food, beverage and packaging costs to 29.3% of total revenue in the quarter, a decrease of 230 basis points - despite higher costs for cheese, tortillas, beans, rice and salsa.


Despite losing some lower-income customers, "the trade-off of modestly lower transactions, but significantly higher margins, is something investors should readily accept," BTIG analyst Peter Saleh wrote in a note.

In a survey of 1,000 Chipotle customers, BTIG found that 45% of customers earning $75,000 or more visited one of the chain's restaurants a few times per month or more.

Its price hikes "had little impact on Chipotle's typical, most loyal consumer," Saleh wrote.

Rewards Program

In 2022, Chipotle's rewards program grew 20% to 31.6 million members, the company said.

Read More: Chipotle To Hire 15,000 Workers Across North America

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