Chipotle Shares Stable Despite Cutting Annual Sales Forecast

Chipotle Mexican Grill Inc. (CMG.US) remained stable on Thursday after the fast-casual restaurant chain lowered its full-year sales outlook and reported its first quarterly sales decline in nearly five years.

Q1 Results Miss Expectations 

Chipotle reported first-quarter earnings of 29 cents per adjusted share, slightly above the 28 cents analyst estimate, but comparable sales declined 0.4%, falling well short of the expected 1.74% growth. Revenue rose 6.4% to $2.88 billion but missed the $2.94 billion forecast. The sales decline was driven by a 2.3% drop in transactions, partially offset by a 1.9% increase in average check size.

Performance metrics showed mixed results with restaurant-level operating margin at 26.2%, above the estimated 25.9%, while the company opened 57 new restaurants versus an expected 58. Average restaurant sales reached $3.19 million, slightly above the $3.17 million forecast.

Store Sales. Source: Bloomberg L.P.

Reduced Guidance 

The company lowered its fiscal 2025 outlook:

• Comparable restaurant sales now expected in the low-single-digit range, down from previous low to mid-single digit forecast
• Still plans to open 315 to 345 new restaurants
• Maintains estimated underlying effective tax rate between 25% and 27% before discrete items

"While our first quarter results were impacted by several headwinds including weather and a slowdown in consumer spending, our teams continue to make significant progress improving the execution in our restaurants," said Scott Boatwright, Chief Executive Officer, Chipotle. "I am confident that we have a strong plan to return to positive transaction comps by the second half of the year."

The company cited consumer anxiety about economic issues such as tariffs as the primary reason for the pullback in spending. CFO Adam Rymer noted the decline was broad-based across income groups and geographies, reflecting concerns "about what's to come more so than anything else" despite relatively strong job market indicators.

Chipotle expects the current 10% tariffs, along with 25% levies on aluminum, to impact second-quarter results by approximately 20 basis points. The company has stated it does not plan to raise menu prices to offset these costs, with Boatwright indicating they would absorb the increased costs rather than pass them on to consumers.

The Board also authorized an additional $400 million share repurchase program. Barclays analyst Jeffrey Bernstein lowered the firm's price target on Chipotle to $52 from $56 following the report.

Chipotle (D1)

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