Chipotle's quarterly results shine as burrito demand holds strong

By Deborah Mary Sophia

(Reuters) -Chipotle Mexican Grill topped market estimates for quarterly profit and sales on Tuesday, helped by its relatively wealthier clientele ordering its burritos and rice bowls despite menu items getting pricier.

Shares of the California-based company were up nearly 3% in after-hours trading.

While customer traffic dropped 1.6% across the U.S. fast-food industry in the quarter, according to Placer.ai data, Chipotle has bucked the trend.

Visits to Chipotle stores rose in all three months of the quarter, the data showed. The company increased menu prices by 3% in October.

"Compared to what McDonald's reported, which was a little bit of a concern with the lower-income consumer, Chipotle is ... showing a lot of adaptability to whatever the economic circumstance of the consumer is," Northcoast Research analyst Jim Sanderson said.

McDonald's on Monday posted its first quarterly sales miss in nearly four years and said low-income consumers in the U.S. were reducing order sizes or trading down to cheaper items.

Chipotle's raw material costs for ingredients such as beef and queso have risen in recent months but were offset by lower costs of paper and some vegetables, aiding margins. Operating margin in the December quarter rose to 25.4% from 24% a year earlier.

But with fast-food workers' minimum wages set to rise in April, the company expects wage inflation to tick up to mid-single digit range. Chipotle said on a post-earnings conference call that it was looking at options to protect margins.

"Labor inflation was going down but the (wage increase) is going to push it up ... That's going to require some kind of pricing, we just haven't decided what kind," Chief Financial and Administrative Officer Jack Hartung told Reuters in an interview.

Chipotle reported an adjusted profit of $10.36 per share in the quarter, handily beating LSEG estimates of $9.75 per share.

Quarterly comparable sales rose 8.4%, topping expectations of a 7% increase.

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Chipotle has not changed its plans to open stores in Dubai and Kuwait amid the Middle East conflict, Hartung added.

It expects comparable restaurant sales growth in the mid-single digit range for 2024, compared with analysts' estimate for a 5.34% increase.

(Reporting by Deborah Sophia in Bengaluru; Editing by Shilpi Majumdar and Rashmi Aich)