Chipotle Mexican Grill posts sales miss as pricey menu weighs on demand

By Juveria Tabassum

(Reuters) -Chipotle Mexican Grill on Tuesday fell short of market expectations for third-quarter same-store sales growth as higher menu prices dented demand for its rice bowls and burritos in the United States. 

Shares of the company fell 5% in extended trading. They have risen nearly 30% so far this year.

Restaurant chains in the United States have struggled with muted demand this year as consumers pare back spending on higher-priced menu items and instead hunt for deals. 

Still, stable demand for Chipotle (NYSE:CMG )'s popular offerings of burritos, rice bowls and tacos from loyal customers has helped the company stave off some of the pressure being felt by fast food chains such as McDonald's (NYSE:MCD ).

However, higher prices of commodities such as beef, dairy and avocado have weighed on margins for the burrito chain, along with higher promotional expenditure in the reported quarter.

Restaurant level operating margin in the reported quarter was 25.5%, down from 26.3% a year ago.

Foot traffic at Chipotle grew 12.7% in the third quarter, compared with about 15% growth in the preceding three-month period, according to data from Placer.ai.

Chipotle's comparable sales rose 6% in the third quarter, compared with analysts' average estimate of a 6.3% rise, according to data compiled by LSEG.

Chipotle also maintained its full year comparable restaurant sales target of growth in the mid to high-single digit range.



Revenue rose about 13% to $2.80 billion in the three months ended Sept. 30, but narrowly missed analysts' estimates of $2.82 billion.

Chipotle named insider Scott Boatwright as interim CEO in August after Brian Niccol, credited for driving a revival in sales and profit at the burrito chain, resigned from the top job to take over as CEO of coffee chain Starbucks (NASDAQ:SBUX ).

Source: Investing.com