Chipotle Mexican Grill Inc CMG.N has forecast second-quarter same-store sales above analysts' estimates, betting demand for its burritos and rice bowls will remain buoyant despite a few rounds of price increases.
The burrito chain forecast comparable restaurant sales growth of 10% to 12% for the current quarter, compared with estimates of 8.8% growth, according to IBES data from Refinitiv.
Chipotle, like rivals McDonald's Corp MCD.N and Starbucks Corp SBUX.O, has raised prices of its in-store and delivery menus in a bid to counter higher prices for everything from employee wages to beef, avocados and paper.
Get a FREE Digital Subscription!Enjoy full access to Hospitality Ireland, our weekly email news digest, all website and app content, and every digital issue.
Food, beverage and packaging costs in the first quarter were 31% of total revenue, an increase of 100 basis points from a year earlier.
In late March, Chipotle hiked the price of a carnitas bowl at one New York City location by 5% to $11.55, a Reuters track of prices showed, though raising menu prices is "really the last thing we want to do," CEO Brian Niccol said in an interview.
Chipotle's core customers - which analysts say are among the most affluent and youngest - have not pushed back against more expensive meals, Niccol said.
Despite increased prices for customers, higher food costs also squeezed restaurant margins, which dropped 160 basis points to 20.7%. Margins should rebound to 25% in the second quarter if inflation stabilizes, he said.
Automating kitchen tasks could eventually help offset higher labor costs. The company is preparing to test Chippy, a robotic arm that fries tortilla chips, in one California location.
Chipotle is also exploring robots to remove tasks employees say they don't like - chopping onions and jalapenos and coring avocados - although employees enjoy mashing the guacamole, Niccol said.
Comparable sales rose 9% in the first quarter ended 31 March, while analysts polled by Refinitiv expected 7.9% growth.
Earning Per Share
On an adjusted basis, Chipotle earned $5.70 per share in the first quarter, beating estimates of $5.64.