Chipotle Shares Drop Amid Weak Sales Outlook as Youths Cut Spending
Chipotle Mexican Grill shares dropped significantly amid a bleak sales outlook, reflecting a trend of reduced spending among younger consumers. The company announced a decline in its annual sales forecast for the third time this year, indicating that economic pressures may continue into 2026.
Sales Forecast Cut for Chipotle
Chipotle now anticipates a low single-digit percentage decline in same-store sales for 2025. This marks a downward revision from previous forecasts that predicted flat sales and low to mid-single-digit growth. The third-quarter revenue increased by 7.5%, reaching $3 billion, although it fell short of the $3.03 billion expected by analysts.
Mixed Earnings Report
Adjusted earnings per share for the quarter were $0.29, aligning closely with Wall Street expectations. However, same-store sales experienced modest growth of only 0.3% year over year, which was less than the 1.36% anticipated by analysts. Traffic to Chipotle locations declined by 0.8%, marking the third consecutive quarterly drop.
Impact of Economic Factors
CEO Scott Boatwright highlighted that low- and middle-income consumers, who contribute approximately 40% of sales, are dining out less due to economic uncertainty, rising inflation, and increased unemployment rates. Additionally, escalating beef costs and tariffs have pressured the company’s profitability, leading to a decrease in the restaurant-level margin from 25.5% to 24.5% compared to last year.
Strategic Future Plans
Looking ahead, Chipotle plans to open between 350 and 370 new locations in the upcoming year, including 10 to 15 international outlets through partnerships. CFO Adam Rymer noted that the company will adopt a cautious approach to pricing rather than fully mitigating cost increases. Boatwright emphasized the importance of enhancing restaurant operations and increasing marketing initiatives. The company aims to introduce more side items, dips, and a selection of three to four limited-time proteins to attract customers and encourage higher spending.
Year-to-Date Performance
- Chipotle shares have decreased by over 47% in 2023.
- Third-quarter revenue rose to $3 billion, but fell short of estimates.
- Adjusted EPS for the quarter was $0.29.
- Same-store sales increased by 0.3% year-over-year.
- Foot traffic decreased by 0.8% for the third consecutive quarter.
The current financial landscape presents challenges for Chipotle as it navigates shifting consumer behaviors and economic uncertainties. The company’s strategic initiatives may play a crucial role in stabilizing performance in the upcoming year.
