News that the fast-growing burrito chain is considering menu price
increases in the third quarter contributed to the stock gain because
such a move could further boost the chain's sales results.
The fast-growing burrito chain said sales at restaurants open at
least 13 months, a closely watched gauge of industry performance,
rose 9.3 percent during the fourth quarter, better than the 6.7
percent expected by analysts, according to Consensus Metrix. Most of
the restaurant sales growth came from increased traffic, Chipotle
Chipotle's results landed after some major restaurant chains
reported cooling or falling sales for the latest quarter. Traffic to
brick-and-mortar stores also posted a steep drop during the holiday
season, as shoppers shopped online from the comfort of their
U.S. same-restaurant sales at Starbucks Corp <SBUX.O> were up 5
percent, mainly because of traffic gains. Still, that result
softened from the prior period.
Elsewhere, sales at McDonald's Corp's <MCD.N> U.S. restaurants open
at least 13 months fell 1.4 percent in the fourth quarter, when
overall traffic to its global restaurants declined.
Chipotle's fourth-quarter net income increased nearly 30 percent to
$79.6 million, or $2.53 per share, matching analysts' average
estimate, according to Thomson Reuters I/B/E/S.
Food costs were 33.9 percent of revenue, an increase of 40 basis
points, due mostly to higher avocado costs, but also to costs for
tomato and corn salsa. Those increases were partially offset by
lower dairy and steak costs.
A price increase in the ballpark of 3 percent to 5 percent is likely
in the third quarter to help offset higher food costs, although no
decision has been made, Chief Financial Officer Jack Hartung said.
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Chipotle, known for using antibiotic-free meats and organic produce
when possible, was the first major U.S. restaurant chain to announce
plans to remove food ingredients containing genetically modified
organisms, or GMOs, from its supply chain.
"As of now, all of our cooking oils used in North America are made
from ingredients that are not genetically modified, and there are
only a few key steps left before all of our food is made without
genetically modified ingredients," said Steve Ells, Chipotle's
founder, chairman and co-CEO.
The company plans to finish removing GMO ingredients from its corn
and flour tortillas by the end of this year, Ells said.
Chipotle raised its 2014 forecast to call for low to mid single
digit same-restaurant sales increases, excluding any menu price
increases. Its prior call was for an increase in the low single
Executives also plan to open 180 to 195 new Chipotle restaurants in
2014, more than ever before.
Chipotle sales rose 12.6 percent to $556.28 in extended trading
after closing at $493.96.
(Reporting by Lisa Baertlein in Los
Angeles; editing by Steve Orlofsky and Andre Grenon)
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