Chipotle's Q4 Earnings: Revenue Miss, EPS Beat, Food Costs Soar, Shares Tumble

Chipotle Mexican Grill (CMG) reported its fourth-quarter earnings on Tuesday, with a mixed bag of results that left investors unimpressed. While the company managed to beat earnings per share (EPS) estimates, its revenue fell short of expectations, and food costs surged due to its focus on "generous portions." As a result, Chipotle's shares slid in after-hours trading.

The fast-casual dining chain reported net income of $331.8 million, or $0.24 per share, compared to $282.1 million, or $0.202 per share, in the same period last year. Adjusted EPS came in at $0.251, beating analysts' estimates of $0.24. However, total revenue of $2.85 billion missed expectations by $10 million, as same-store sales growth of 5.4% fell short of the 5.7% consensus estimate.

Chipotle's food, beverage, and packaging costs increased to 30.4% of total revenue, up from 29.7% in the fourth quarter of 2023. The company attributed this increase to higher usage of ingredients, a shift in protein mix, and inflation across several items, including avocados and dairy. Despite these higher costs, Chipotle's operating margin improved to 14.6% from 14.4% in the same period last year.



Chipotle's focus on "generous portions" has been a key driver of its success, but the increased food costs have raised concerns about the company's ability to maintain profitability in the long term. As food costs continue to rise, Chipotle may face challenges in passing on these increased costs to consumers without negatively impacting sales.

Moreover, the increase in food costs has raised questions about Chipotle's pricing power and customer perception of value. As the company raises menu prices to offset higher costs, customers may begin to question the value they receive for their money, potentially leading to a decline in sales.

Chipotle's shares fell more than 3% in after-hours trading following the earnings report, as investors digested the mixed results and the potential impact of higher food costs on the company's long-term prospects. As Chipotle continues to navigate the challenges of rising food costs and a competitive fast-casual dining landscape, investors will be watching closely to see how the company adapts and responds to these pressures.