Chipotle Mexican Grill reported strong second-quarter results, with earnings and revenue surpassing Wall Street’s expectations. The company’s restaurant traffic increased 8.7% during the quarter, defying the industry-wide slowdown. Chipotle’s net income rose to $455.7 million, or 33 cents per share, compared to $341.8 million, or 25 cents per share, in the previous year.
The profit increase was attributed to price hikes that helped offset higher avocado prices and increased oil usage for frying tortilla chips. The company earned 34 cents per share, excluding items, beating the expected 32 cents. Net sales climbed 18.2% to $2.97 billion, slightly above the expected $2.94 billion.
Same-store sales grew by 11.1%, surpassing StreetAccount estimates of 9.2%. CEO Brian Niccol noted that demand for Chipotle’s food peaked in April, with same-store sales settling around 6% higher in June. Despite backlash on social media regarding the size of burrito bowls, Chipotle denied reducing portions and is now focusing on employee training to ensure customer satisfaction.
Chipotle beats Wall Street expectations
The company is also gaining market share, with restaurant transactions growing across all income levels. During the quarter, Chipotle opened 52 new company-owned locations and one internationally licensed restaurant.
The company reiterated its full-year outlook, expecting same-store sales to grow by a mid- to high-single-digit percentage, and plans to open between 285 and 315 new restaurants this year. Chipotle’s impressive earnings report has bolstered investor confidence, resulting in a notable jump in its stock price. The company’s digital sales accounted for 35.3% of total food and beverage revenue while operating income increased to 19.7% of sales from 17.2% a year ago.
Restaurant-level margins improved by 140 basis points year-over-year to 28.9% of sales, primarily driven by sales leverage benefits, partially offset by wage and ingredient inflation. Food, beverage, and packaging costs remained steady at 29.4% of sales, while labor costs as a percentage of sales fell by 20 basis points to 24.1%. CEO Brian Niccol stated, “The second quarter was outstanding as successful brand marketing, including the return of Chicken Al Pastor, drove strong demand to our restaurants.
Our focus and training around throughput paid off as we met stronger demand trends with terrific service and speed, driving over 8% transaction growth in the quarter.”
Other restaurant stocks, such as Noodles, Shake Shack, and CAVA Group, also experienced gains in the late session following Chipotle’s strong performance.
