Chipotle Mexican Grill Inc has topped Wall Street expectations for first-quarter profits and sales, helped by higher menu prices, 41 new restaurant openings and some recovery among lower-income customers.
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The company said it expects second quarter and full year comparable sales growth in the mid-to-high single digits. Analysts were expecting a growth of 5.7% and 5.9%, respectively.
Chipotle's base of higher-income customers were eating its bowls and burritos more often, chief executive Brian Niccol said during an earnings call, adding that lower-income customers were also eating at Chipotle more often after a pullback, though their visits are not back to where they were a year ago.
"We've seen nice improvements across all of our income cohorts," he said. People with household incomes of at least $100,000 make up more of Chipotle's customer base than at some other fast-food and fast-casual brands.
Even with inflation squeezing household budgets, restaurant chains are expected to post higher sales growth in the first quarter.
McDonald's Corp reported a 12.6% rise in first quarter global comparable sales as American consumers kept dining out.
Comparable sales at California-based Chipotle jumped about 11% in the first quarter, while analysts on average expected an 8.6% rise, according to Refinitiv data.
Chipotle's menu prices were about 10% higher in the first quarter versus last year, but they will be only about 5% higher in the second quarter as previous price hikes roll off, chief restaurant officer Scott Boatwright said in an interview.
"You're paying more… but for still relatively good value on the plate," said Kevin McCarthy, a portfolio manager at Neuberger Berman, whose accounts hold some Chipotle shares.
Chipotle has no plans to increase prices the rest of the year, but that could change if labor or commodity costs surge, according to Boatwright.
Lower avocado costs helped margins, but they may not persist. Inflation in the second half is "really a wild card," Chief Financial Officer Jack Hartung said on the earnings call.
Chipotle's restaurants were more profitable, with store-level operating margins rising to 25.6% from 20.7% a year ago, due in part to lower avocado costs and lower delivery expenses as delivery volumes fell.
Net income was $291.6 million, or $10.50 per diluted share, beating analysts expectations of $248.4 million and $8.92. Profits per share were 84% higher than last year on an adjusted basis.
Chipotle Mexican Grill Stock Heats Up To Record High After Strong Results
The above news was followed by news that shares of Chipotle Mexican Grill Inc soared to a record high on after the burrito chain beat analysts' estimates for first-quarter profit and sales.
Chipotle said its revenue rose 17% year-on-year to $2.4 billion, driven by higher restaurant sales, 41 new store openings, and increased demand from lower-income customers. Net income rose to $291.6 million, up 84% from the previous year, helped by lower avocado prices and lower delivery expenses.
Analysts' average forecast of Chipotle's revenue and net income were $2.33 billion and $248.4 million, according to Refinitiv data.
Its stock has had a spectacular run since Brian Niccol was named chief executive in February 2018 just as the burrito chain was grappling with a wave of food poisoning outbreaks that crushed sales.
"We'd been a bit tactically cautious on Chipotle Mexican Grill shares post fourth quarter, albeit favorably inclined toward the longer-term growth story at the right price," Morgan Stanley analysts wrote in a note to investors.
"Recent performance sidelines the near-term bear concerns, which had focused on traffic or price sensitivity and margin upside versus current expectations."
More than a dozen Wall Street analysts hiked their price targets on the stock in reaction to the company's report. The average rating on Chipotle among the 34 analysts covering the company is "buy" with a median price target of $2,050.00, up about 12% from a month ago, according to Refinitiv data.
Read More: Chipotle Misses Profit As High Prices Bite Into Delivery Orders, Traffic
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