Chipotle Mexican Grill Inc forecast second-quarter same-store sales above analysts’ estimates on Tuesday, betting demand for its burritos and rice bowls will remain buoyant despite a few rounds of price increases.
The burrito chain forecast comparable restaurant sales growth of 10 percent to 12 percent for the current quarter, compared with estimates of 8.8 percent growth, according to IBES data from Refinitiv.
The company’s shares rose nearly 5 percent in extended trading.
Chipotle, like rivals McDonald’s Corp and Starbucks Corp, has raised prices of its in-store and delivery menus in a bid to counter higher prices for everything from employee wages to beef, avocados, and paper.
Food, beverage and packaging costs in the first quarter were 31 percent of total revenue, an increase of 100 basis points from a year earlier.
In late March, Chipotle hiked the price of a carnitas bowl at one New York City location by 5 percent to $11.55, a Reuters track of prices showed, though raising menu prices is “really the last thing we want to do,” CEO Brian Niccol said in an interview.
Chipotle’s core customers—which analysts say are among the most affluent and youngest—have not pushed back against more expensive meals, Niccol said.
Despite increased prices for customers, higher food costs also squeezed restaurant margins, which dropped 160 basis points to 20.7 percent. Margins should rebound to 25 percent in the second quarter if inflation stabilizes, he said.
Automating kitchen tasks could eventually help offset higher labor costs. The company is preparing to test Chippy, a robotic arm that fries tortilla chips, in one California location.
Chipotle is also exploring robots to remove tasks employees say they don’t like - chopping onions and jalapenos and coring avocados - although employees enjoy mashing the guacamole, Niccol said.
Comparable sales rose 9 percent in the first quarter ended March 31, while analysts polled by Refinitiv expected 7.9 percent growth.
On an adjusted basis, Chipotle earned $5.70 per share in the first quarter, beating estimates of $5.64.
