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Chipotle stock falls after ‘tightening’ consumer spending leads to second earnings miss in five years

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Shares of Chipotle Mexican Grill Inc. fell in late trading Tuesday after the fast-casual Mexican chain missed expectations for holiday earnings amid “tightening” consumer spending and more expensive burritos.

The results mark only the second time in five years that Chipotle
reported earnings per share that came up short of Wall Street’s expectations. The last time that happened was the same quarter in 2020.

The chain reported fourth-quarter net income of $223.7 million, or $8.02 a share, compared with $133.5 million, or $4.69 a share, in the same quarter in the prior year. Revenue rose 11% to $2.18 billion, compared with $1.96 billion in the prior-year quarter. Same-store sales gained 5.6%.

Excluding the impact from certain legal proceedings and restructuring, Chipotle earned $8.29 a share, compared with $5.58 a share in the prior-year quarter. Analysts polled by FactSet expected adjusted earnings per share of $8.91, on revenue of $2.23 billion. They expected same-store sales growth of 6.9%.

“With consumer discretionary spending tightening, we are focused on running great restaurants and delivering excellent customer and employee experiences,” Chief Executive Brian Niccol said in a statement.

Chipotle said it expected first-quarter same-store sales to increase “in the high-single-digits.” That outlook was based on a “low-double-digits” percentage gain in same-store sales notched in January. FactSet forecast 6.7% growth for the first quarter.

Shares slid more than 4% in after-hours trading on Tuesday.

Even as layoffs hit other industries and inflation still gouges consumers, Chipotle last month said it would hire 15,000 staff, in preparation for what it called “burrito season.” In October, management said some lower-income consumers had ordered food less frequently, after the chain raised prices in part to counter higher costs for employees and ingredients. However, they said most of their customers earned at least $75,000 annually.

BTIG analyst Peter Saleh, in a note last month, said Chipotle likely raised its prices too much, potentially causing more customers to turn away from the chain.

“However, we believe the trade-off of modestly lower transactions, but significantly higher margins, is something investors should readily accept,” he said.

Analysts have said the chain’s digitally-geared drive-through lanes, called Chipotlanes, have helped drive sales. William Blair analysts, in a note last month, said they expected an update on the chain’s progress with a new training program intended to help employees clear orders. Those analysts said that Chipotle had been testing a robot that helps make tortilla chips.

Shares of Chipotle have moved 18% higher over the past 12 months. By comparison, the S&P 500 index
has fallen 7% over that period.


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