Chipotle Mexican Grill (hereafter, Chipotle), a leading American casual dining chain, met market expectations with its third-quarter performance.
According to NH Investment & Securities, Chipotle’s third-quarter revenue rose 13.0% year-over-year to $2.79 billion, while operating profit increased by 19.8% to $470 million. Earnings per share (EPS) climbed 21.7% to $0.28, slightly exceeding consensus estimates, although revenue came in just below expectations.
Same-store sales increased by 6% compared to last year’s period, missing the market expectation of 6.3% and reflecting a slowdown from previous quarters. Chipotle opened 86 new locations, with digital sales accounting for 34.0% of total revenue during the third quarter.
Despite rising costs for key ingredients like avocados and dairy products, the company remains committed to offering generous portions as a core brand value. This stance addresses the “Chipotle Stop the Skimp” controversy, which has been circulating on major social media platforms since the second quarter. As a result, the proportion of food, beverage, and packaging costs relative to total revenue increased to 30.6%.
NH Investment & Securities analyst Han Wi noted that the announcement of third-quarter revenue growth, which fell short of expectations, has fueled market skepticism regarding improvements in consumer traffic and short-term profit momentum.
Han elaborated, “Although short-term performance expectations are lacking, the potential for enhancing long-term profitability through technology investments remains valid.”
In summary, while the company has maintained its annual guidance, there are no strong catalysts to boost confidence in short-term momentum improvement.
Han further explained that the benefits of technology investments to improve long-term profitability are expected to materialize gradually. For instance, the company plans to expand the use of double-sided grills to optimize peak-time operations and fully deploy slicers for ingredient preparation by next summer.
Based on this analysis, a long-term buy perspective remains valid, as enhanced order-processing capabilities are anticipated to improve customer experience and profitability.
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