TLDR
- Revenue of $3 billion fell short of $3.03 billion analyst expectations in third quarter
- Full-year 2025 same-store sales now projected to decline in low single digit percentage
- Customer traffic decreased 0.8% as visits across all income levels dropped
- Operating margin compressed to 15.9% from 16.9% on elevated protein costs
- Shares plummeted 13% in after-hours trading on the disappointing results
Chipotle Mexican Grill slashed its full-year sales forecast Wednesday after reporting weak third quarter results. The move marks the third straight quarter the restaurant chain has reduced its outlook.
Chipotle Mexican Grill, Inc., CMG
Third quarter revenue totaled $3 billion, coming in below Wall Street’s $3.03 billion estimate. Earnings per share of 29 cents matched analyst projections.
The company now forecasts full-year same-store sales will fall by a low single digit percentage in fiscal 2025. That’s a sharp reversal from February when management expected low to mid single digit growth.
Customer Visits Keep Falling
Same-store sales inched up just 0.3% during the quarter. The modest increase came solely from a 1.1% bump in average check size. Customer traffic declined 0.8%.
CEO Scott Boatwright described “consistent macroeconomic pressures” weighing on results. Traffic has now fallen for three consecutive quarters at the chain.
The 25 to 35 age group is facing particular challenges. These customers are dealing with elevated unemployment, rising student loan payments and wage growth that isn’t keeping pace with inflation.
“We tend to skew younger and slightly over-indexed to this group relative to the broader restaurant industry,” Boatwright said on the earnings call. These diners are visiting less often but haven’t abandoned the brand entirely.
Customers making less than $100,000 annually represent roughly 40% of Chipotle’s customer base. This segment has reduced spending more sharply as economic worries mount.
The chain outpaced competitors throughout 2024 thanks to its affluent customer base. But the spending slowdown that hit value-focused restaurants last year has now spread to Chipotle.
Consumers across every income bracket are pulling back on restaurant visits. The weakness shows how widespread economic concerns have become.
Food Cost Inflation Squeezes Margins
Operating margin contracted to 15.9% compared to 16.9% in the prior year period. Rising beef and chicken prices ate into profitability even as menu prices increased.
The company added 84 new company-run locations and two licensed international units during the quarter. New restaurant openings pushed total net sales up 7.5% to $3 billion.
CFO Adam Rymer acknowledged that performance remained under pressure through the quarter and into October. Increased marketing investment and new menu items like carne asada and red chimichurri generated some positive momentum.
Boatwright ruled out using discounts to drive traffic. He maintained that Chipotle offers strong value but admitted customers are grouping the chain with pricier fast-casual competitors.
The average Chipotle meal costs around $10 compared to roughly $15 at similar restaurants. Management will rely on improved operations, enhanced marketing, better digital experiences and menu innovation to rebuild traffic.
Chipotle plans to open 350 to 370 new locations in 2026. The expansion includes 10 to 15 international units operated by franchise partners as global growth accelerates.
A joint venture with Korea-based SPC Group was announced last month. Additional development agreements are in place for the Middle East and Latin America markets.
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