Chipotle Mexican Grill Inc. shares went up after business hours on Wednesday after the fast-casual Mexican chain reported second-quarter results that were better than expected and kept its sales outlook. This comes as the restaurant industry as a whole is in the middle of a discount war.
The company said that the results were helped by a renewed focus on speed of service and the return of at least one popular menu item. This was done because the company was still worried about the demand for dining out as consumers struggled with inflation.
CEO Brian Niccol said in a statement, “The second quarter was outstanding. Strong demand to our restaurants was driven by successful brand marketing, including the return of Chicken Al Pastor.”
“Our training and focus on throughput paid off, as we were able to meet the higher demand trends with great service and speed, which led to over 8% growth in transactions during the quarter,” he said.
In the second quarter, the company made $455.7 million, or 33 cents per share. This is up from $341.8 million, or 25 cents per share, in the same quarter last year. When an investment loss is taken into account along with higher legal reserves, Chipotle
Each share of CMG -1.47% made 34 cents.
The sales went up 18.2% to $2.97 billion. Sales at the same store went up 11.1%.
According to a poll by FactSet, analysts thought Chipotle would report adjusted earnings per share of 32 cents, with sales of $2.94 billion and 9.2% growth in same-store sales.
The company stuck to its prediction that same-store sales would grow by at least 10% over the course of the year. FactSet thought it would go up by 7.4%.
After hours, shares were up 14.3%. Even though shares are up 13% so far this year, they fell from record highs after going up for a long time.
During that time, many restaurants raised the prices of both eating out and taking food to go because of higher costs for ingredients and higher wages for staff. Menu price increases have sometimes helped boost sales. More recently, though, fast food chains have started to offer discounts to try to get or keep customers who are tired of high prices and want cheaper options.
In April, Chipotle said that it had gained customers with low, middle, and high incomes. It said that these customers were responding to “great value in this environment.”
Analysts at William Blair said in a note last week that the discounting wave was likely to hurt fast-casual chains like Chipotle the least because they use better ingredients.
They said this about the restaurant business as a whole: “We think sales trends in the second quarter were mixed. Concepts that have traditionally competed on price seem more vulnerable to consumer pushback after several years of huge price hikes, while concepts that compete more on quality and service seem to have been less affected.”
“That being said,” they went on, “overall restaurant trends seemed to stay pretty similar to the first quarter, though there were some signs of slowing down in June.” As the price difference between fast food and casual dining has shrunk, trade-down from casual dining and trade-up from fast food may be helping fast-casual restaurants the most.
This month, Chipotle announced that Jack Hartung, who has been its CFO for a long time, would be leaving the company on March 31. In June, the company carried out a huge stock split that they had announced earlier.
