Chipotle Shares Drop as Q3 Sales Miss Wall Street Estimates

Chipotle Mexican Grill (CMG) shares fell after hours on Tuesday, following the release of its third-quarter financial results. The Mexican fast-casual chain reported net income of $387.4 million, or 28 cents a share, compared with $313.2 million, or 23 cents a share, in the same quarter last year. Revenue rose 13% year over year to $2.79 billion, while same-store sales grew 6%. However, these figures fell short of analysts' expectations, leading to a 7.4% decline in the stock price.


Analysts polled by FactSet expected Chipotle to report adjusted earnings per share of 25 cents, on revenue of $2.82 billion and same-store sales growth of 6.3%. The company's comparable restaurant sales of 6% were below the estimated 6.3%, contributing to the revenue miss. Additionally, higher food and beverage costs, driven by inflation and increased usage of ingredients, negatively impacted operating margins.


Chipotle's digital sales represented 34% of total food and beverage revenue, a slight decrease from the previous quarter. This may have contributed to the sales miss, as digital sales have been a significant driver of growth for the company. However, the company's focus on enhancing guest access and convenience through Chipotlanes continues to be a positive factor, with these locations performing well and contributing to increased sales, margins, and returns.

The company's new interim CEO, Scott Boatwright, will need to inspire confidence in investors that Chipotle can continue to thrive under his leadership. Analysts at Baird expect Boatwright to focus on executing the same successful playbook that has been in place in recent years, rather than establishing new strategic priorities. Wedbush analysts also highlighted new menu items and loyalty-program expansion as factors that could help Chipotle's results.

In conclusion, Chipotle's shares fell after hours on Tuesday due to a sales miss in the third quarter, which was driven by lower-than-expected comparable restaurant sales and higher food and beverage costs. The company's digital sales also contributed to the miss, but the focus on enhancing guest access and convenience through Chipotlanes remains a positive factor. Investors will be looking for interim CEO Scott Boatwright to instill confidence in the company's future prospects.