Chipotle shares fall after holiday earnings miss estimates

Chipotle Mexican Grill Inc.'s shares fell in late trading Tuesday after the fast-casual Mexican chain missed expectations for holiday earnings due to tight consumer spending and more expensive burritos.

The results are the second time in five years that Chipotle CMG reported earnings per share that came up short of Wall Street expectations. The last time that happened was in 2020.

The chain reported fourth-quarter net income of $223.7 million, or $8.02 a share, compared to $133.5 million, or $4.69 a share, in the same quarter in the previous year. Revenue rose by 11% to $2.18 billion, compared with $1.96 billion in the prior-year quarter. Same-store sales increased by 5.6%.

Chipotle earned $8.29 a share, compared to $5.58 a share in the prior-year quarter, despite the impact of certain legal proceedings and restructuring. Analysts polled by FactSet expected adjusted earnings per share to be $8.91 and revenue of $2.23 billion. They predicted same-store sales growth of 6.9%.

The Chief Executive Brian Niccol said that the company was focused on running great restaurants and delivering excellent customer and employee experiences with consumer discretionary spending tightening.

Chipotle said it expected first-quarter same-store sales to increase in the high-single digits. That outlook was based on a low-double-digits gain in same-store sales notched in January. FactSet predicted a 6.7% growth for the first quarter.

Shares fell more than 4% in after-hours trading on Tuesday.

Chipotle said last month it would hire 15,000 staff in preparation for the burrito season, even as layoffs hit other industries and inflation still gouges consumers. In October, management said that some less-income consumers had ordered less food after the chain raised prices in part to counter higher costs for employees and ingredients. They said that most of their customers earned at least $75,000 a year.

In a note last month, Peter Saleh, BTIG analyst, said Chipotle likely raised its prices too much, potentially causing more customers to turn away from the chain.

However, he said that investors should accept the trade-off of modestly lower transactions but significantly higher margins.

The chain's digitally geared drive-through lanes, called Chipotlanes, has helped drive sales, according to analysts. In a note last month, William Blair analysts said they expected an update on the chain's progress with a new training program designed to help employees clear orders. Analysts said Chipotle had been testing a robot that helps make tortilla chips.

The shares of Chipotle have gone 18% higher over the past 12 months. The S&P 500 index SPX has fallen 7% over the period.