Chipotle Mexican Grill Inc. may be raising menu prices after noting food costs were up during Wednesday’s second-quarter earnings call with investors. Total revenue increased 13.6% to $2.51 billion, which fell short of the $2.53 billion expected by analysts. The chain’s net income, however, was $341.8 million, or $12.32 per share, up from $259.9 million, or $9.25 per share, a year earlier, according to a company press release.
“Chipotle’s second quarter results demonstrate our ability to drive strong performance by focusing on exceptional food and exceptional people,” Chairman and CEO Brian Niccol said in a company press release. “Additionally, our investment in our employees, technology, and innovation in our restaurants along with expanding access and convenience in North America and laying the groundwork for international growth, set us up for long-term success.”
After increasing menu prices several times over the past two years, Chipotle said during the April 2023 Q1 earnings call that increases were off the table after reporting better-than-expected earnings. CFO Jack Hartung, however, said Wednesday that things may have to change considering prices of main ingredients — tortillas, dairy, beef, salsa, beans, rice and spices — have increased. Although lower-cost avocados and the popularity of Chicken al Pastor shifting some customers away from costly beef were helping, inflation may still have an effect on pricing.
“We will … look at our customer demand transaction patterns as well before we make any final decisions on price,” he said.
Niccol agreed, saying his approach to pricing is the “last lever” he pulls, but inflationary pressures on the labor line and food areas could be an issue.
“As we get closer to the fourth quarter, we’ll make a decision on what we’ll do on the pricing front,” he said.
Highlights of year-over-year Q2, ending June 30, included:
- In-restaurant sales increased 15.8%, while digital sales represented 38.0% of food and beverage revenue.
- Operating margin was 17.2%, an increase from 15.3%.
- Restaurant-level operating margin was 27.5% 1, an increase of 230 basis points.
- Diluted earnings per share was $12.32, a 33.2% increase from $9.25. Excluding a $0.33 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs and corporate restructuring, adjusted diluted earnings per share was $12.65, a 36.0% increase from $9.30.
- Opened 47 restaurants with 40 locations featuring a Chipotlane.
For 2023, management is anticipating the following:
- Third-quarter comparable restaurant sales growth in the low to mid-single-digit range.
- Full-year comparable restaurant sales growth in the mid to high-single-digit range.
- 255 to 285 restaurant openings.
- An estimated underlying effective full-year tax rate between 25% and 27% before discrete items.
Cherryh Cansler is VP of Editorial for Networld Media Group and senior editor of FastCasual.com. She has been covering the restaurant industry since 2012. Her byline has appeared in Forbes, The Kansas City Star and American Fitness magazine, among many others.