Chipotle (CMG) Faces Market Pressure as Comparable Sales Growth Slows

Chipotle’s latest earnings report was met with investor disappointment as the fast-casual restaurant chain posted lower-than-expected same-store sales growth and issued cautious guidance for 2025. Despite delivering modest earnings upside and a 13.1 percent year-over-year revenue increase to 2.85 billion dollars, the market reaction was negative, with the stock moving lower following the announcement.

This was also the first earnings call under new CEO Scott Boatwright, who took over leadership in November after former CEO Brian Niccol stepped down to become Chairman and CEO of Starbucks. Investors are now weighing how the leadership transition, combined with broader operational challenges, will shape the company’s performance in the coming year.

Slowing Same-Store Sales Growth Raises Concerns

A major sticking point in Chipotle’s earnings report was its comparable sales performance. The company had indicated during its third-quarter earnings call that it expected same-store sales growth to accelerate modestly from the 6.0 percent recorded in Q3. However, fourth-quarter comparable sales came in at 5.4 percent, a slight shortfall from those expectations.

This growth was driven by a 4.0 percent increase in transaction volume and a 1.4 percent rise in average check size. While these figures indicate continued customer interest, they also suggest that Chipotle’s ability to drive higher menu prices without impacting foot traffic is beginning to moderate. The company also noted softer traffic trends around the holidays, partially due to the timing of Christmas and New Year's, which fell in the middle of the week.

Adding to the challenge, the company faces difficult comparisons from its limited-time offerings in the prior year. Chipotle had a highly successful Carne Asada promotion in 2023, which set a high bar for repeat performance. Similarly, its fourth-quarter results benefited from the launch of Brisket and improved operational throughput, both of which were not replicated at the same level in the latest quarter.

2025 Guidance Falls Short of Expectations

Investors were particularly disappointed by Chipotle’s guidance for 2025, which called for low to mid-single-digit comparable sales growth. This represents a notable slowdown from the 7.4 percent increase recorded in 2024 and suggests that external and internal headwinds could persist in the near term.

Several factors are contributing to this cautious outlook. First, the company cited increased volatility in same-store sales trends early in the year, particularly in December and January. Weather disruptions were cited as a larger issue than in the prior year, adding uncertainty to first-quarter sales performance.

Second, Chipotle will be rolling off approximately 90 basis points of price increases that were implemented in April 2024. This means that its ability to maintain same-store sales growth will depend more on transaction volume rather than price increases.

Additionally, the company faces difficult year-over-year comparisons in the second quarter due to the success of past promotions. Chipotle’s Braised Beef Barbacoa campaign in February 2024 and the return of its Chicken al Pastor offering in March 2024 were both strong contributors to sales last year. With these promotions not returning at the same scale, the second quarter is expected to be a low point for comparable sales growth.

However, management does expect improvement in the second half of 2025 as new initiatives take hold.

Operational Improvements and Expansion Plans

To counterbalance these challenges, Chipotle is focusing on improving operational efficiencies and expanding its footprint. One of its key initiatives is the modernization of kitchen processes to enhance productivity. The company is rolling out produce slicers across all locations, which is expected to be completed by summer 2025. This upgrade is aimed at reducing one of the most time-consuming tasks in food preparation and improving speed of service.

On the menu front, Chipotle is preparing for a broader rollout of its Chipotle Honey Chicken, which performed well in market tests. This limited-time offering had the strongest results in early sensory testing and pilot locations, suggesting it could be an effective sales driver once introduced nationwide.

The company also remains committed to expansion, having opened a record 304 new locations in 2024, including 257 Chipotlane stores. For 2025, Chipotle plans to open 315 to 345 new locations, with at least 80 percent featuring a Chipotlane drive-thru model. These new locations provide an additional growth lever, though the immediate impact on comparable store sales remains uncertain.

Cost Considerations and Supply Chain Adjustments

Rising ingredient costs, particularly for avocados, have been a concern for investors. The possibility of tariffs affecting avocado imports from Mexico had raised questions about potential cost pressures.

However, Chipotle has diversified its supply chain over the past two years, now sourcing avocados from Colombia, Peru, and the Dominican Republic. Currently, only 50 percent of its avocado supply comes from Mexico, reducing the risk of sharp price swings due to trade policy changes.

Investor Sentiment and Market Outlook

While Chipotle remains a strong brand with a dedicated customer base, the market reaction to its earnings report reflects skepticism about near-term growth potential. Investors had hoped for a more optimistic outlook following a solid 2024 performance, but the combination of slowing comparable sales and a difficult year-over-year comparison has led to caution.

A key question for investors is whether the new leadership under CEO Scott Boatwright is taking a conservative approach to guidance or if the company is truly seeing sustained volatility in sales trends. Given that Chipotle emphasized early-year fluctuations in transaction volume, there is some concern that consumer behavior could be shifting.

At the same time, Chipotle’s commitment to operational improvements and menu innovation could provide support for long-term growth. If the new Honey Chicken rollout proves successful and digital ordering and Chipotlane sales continue to gain traction, the company could see renewed momentum in the second half of the year.

For now, the stock remains under pressure as investors digest the company’s cautious tone. However, long-term investors may view the current dip as an opportunity if they believe in Chipotle’s ability to navigate these near-term headwinds. The brand’s strong positioning, expansion strategy, and operational enhancements could set the stage for a rebound if execution remains solid.

Looking ahead, the next several quarters will be critical in determining whether Chipotle can sustain its growth trajectory or if broader industry challenges will weigh more heavily on performance. Investors should monitor same-store sales trends, promotional activity, and kitchen efficiency improvements as key indicators of future success.