Earnings Results: Chipotle continues growth but says it’s seeing fewer lower-income customers as prices rise

by | Oct 25, 2022 | Stock Market

Chipotle Mexican Grill Inc. on Tuesday reported continued growth, with third-quarter profit beating analysts’ expectations, though its price increases have caused lower-income customers to pull back. Chipotle
CMG,
+2.47%
shares initially rose almost 4% in extended trading before losing those gains during the company’s earnings call, finishing after-hours trading down 1.5%. Shares had risen 2.7% in the regular session to close at $1,588.19. 

The fast-casual restaurant chain reported that transactions decreased 1% in the quarter, though comparable-restaurant sales increased 7.6%, beating analysts’ expectation of 7.3%, and that it opened 43 new restaurants. On the company’s call with analysts, Chief Executive Brian Niccol said lower-income customers reduced their purchase frequency during the quarter, though he said the majority of the company’s customers are higher-income, whom he said earn $75,000 a year or more. “We’re starting to see pressure on the low-income consumer,” Niccol said, adding that “everyone is paying the price” amid inflation. The company has raised prices as its costs, including for labor, have increased 20% over the past two years, he said. Niccol said pricing is “the last lever we pull,” and that for customers, being able to buy a burrito for $9 or less remains a “tremendous value.” Chief Financial Officer Jack Hartung said on the call that earlier this month, the company increased menu prices in about 700 restaurants “to address pockets of outsized wage inflation” — in other words, to offset wage increases. Chipotle …

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