Chipotle Mexican Grill there reported mixed quarterly results and said restaurant-level operating margins shrank.
But the burrito chain saw traffic and same-store sales grow during the quarter as low-income consumers spent more, bucking industry trends, and CEO Scott Boatwright expects to end the year.
The company’s shares rose 7% in extended trade.
“Consumer and broader industry constraints may continue, but initiatives in our growth strategy recipe continue to build and give us more tools to win in any environment,” Boatwright said on the company’s earnings conference call. “We’re still in the early stages of this work, and it’s gaining traction.”
Like the broader restaurant industry, Chipotle saw a softer trend in early October, though executives said traffic is starting to pick up again. Boatwright said the company has “high confidence” in its performance during the fourth quarter.
“We’re very confident that November and December are set up very well for us,” Boatwright said.
Chief Financial Officer Adam Rymer said the company expects same-store sales growth in the fourth quarter to be about 2%.
Here’s what the company reported for the period ended September 30 compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: 27 cents adjusted vs 29 cents expected
- result: $3.29 billion vs $3.29 billion expected
Chipotle reported fiscal third-quarter net income of $339.9 million, or 27 cents per share, down from $382.1 million, or 29 cents per share, a year earlier. The company’s restaurant-level operating margin fell from 24.5% to 23.3%.
Excluding restaurant asset impairment charges and stock-based compensation, the company earned 27 cents per share.
Net sales rose 9.6% to $3.29 billion, boosted by the chain’s new restaurants. During the quarter, Chipotle opened 84 company-owned restaurants and five international locations operated by licensees.
In the second half of July, Chipotle said it began to see sales decline as diners worried about consuming raw lettuce due to cyclospora, even though its own supply had never been affected by the outbreak. Then in August, the chain announced it had temporarily pulled jalapenos from its Minnesota restaurants after learning the supply was potentially linked to a salmonella outbreak.
Still, the chain was able to report same-store sales growth for the third quarter, shrugging off last year’s traffic woes.
Sales at stores open at least 13 months increased by 2.1%, a 1.3% increase in the average check.
For the first time this year, low-income consumers during the quarter outnumbered high-income groups at restaurants, Boatwright said. And discounts are not the reason – low-income consumers are the most in September, when promotions are at their lowest point during the quarter, analysts say.
For the full year, Chipotle reiterated its previous forecast that same-store sales would increase by a low single-digit percentage.
By 2027, the company will open between 340 and 360 new company-owned locations in the US and Canada and around 15 to 25 international restaurants.