Chipotle posted positive gains again on Wednesday afternoon.
In the first quarter, sales rose 14.1% to $2.7 billion, with same-store sales rising 7%, above estimates of 5.13%. The company also beat expectations on the bottom line: Adjusted earnings per share came in at $13.37, compared to estimates of $11.66.
Shares rose 3% in after-hours trading.
Limited-time offerings such as Braised Beef Barbacoa and Chicken al Pastor, offered at a higher price, boosted results amid a challenging macro consumer environment. The chain saw a 5.4% increase in foot traffic, but average inspection increased only 1.6%, below the 2.0% expected.
CEO Brian Niccol called the quarter “excellent,” with improving store throughput and successful marketing initiatives. The results provide “confidence that we can achieve our long-term goal of more than doubling our business in North America and expanding internationally,” he said.
In the first quarter, Chipotle opened 47 new restaurants, with 43 locations offering the Chipotlane drive-thru feature. This year, 285 to 315 new locations are expected to open, more than 80% of which will feature the drive-thru concept. The long-term plan is to operate 7,000 restaurants in North America (currently there are 3,500).
For 2024, the company expects revenue growth in the mid- to high-single-digit range, which is above previous guidance for mid-single-digit growth.
Ahead of the results, Deutsche Bank’s Lauren Silberman wrote in a note to clients that “Chipotle is among the best-performing restaurant stocks.”
Chipotle’s operating margin rose to 16.3% from 15.5% year-over-year, while restaurant-level margins also increased slightly, to 27.5% from 25.6%.
In its earnings release, Wall Street will be watching for updates on its automation efforts, such as its guacamole-making robot Autocado. CEO Brian Niccol told Yahoo Finance that the machine is close to being deployed.
“We are already on our third or fourth prototype [of Autocado]and now we’re like, ‘Okay, this is ready to go to a restaurant.’ I’m sure if we take it to the restaurant we’ll learn something that might make us want to do it again.”
Investors will also wait to see how California’s FAST Act, which raised fast-food wages to $20 an hour, has affected the company’s business in the state. Analysts agreed that Chipotle is among the companies that have the brand strength and following to adapt to change.
“I think brands that offer a lot of value and have good traffic are best positioned,” said BTIG’s Peter Saleh, who pointed out that Chipotle’s chicken bowl costs an average of $9 nationwide, compared to 12 to 13 US dollars for many burger dishes.
“They’ve significantly ramped up their business in terms of traffic,” Citi analyst Jon Tower told Yahoo Finance.
In a note to clients written before the results, William Blair’s Sharon Zackfia said about 14% of total Chipotle locations are in the Golden State, and she suspects Chipotle has raised prices in the state by about 7% to offset rising labor cost pressures .
Here’s what Chipotle reported in the first quarter compared to Wall Street’s expectations, according to Bloomberg estimates:
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Revenue: 2.70 billion US dollars compared to $2.67 billion
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Adjusted earnings per share: $13.37 versus $11.66
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Same-store sales growth: 7% vs. 5.13%
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Transaction growth: 5.4% vs. 3.03%
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Average check growth: 1.6% vs. 2.00%
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
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