Chipotle (CMG) posted a earnings report second quarter that shattered Wall Stree’s expectations thanks to customer return and digital sales — even as it undergoes some scrutiny for raising prices to offset the impact of the labor shortage.
Here’s what the California-based company reported, compared to Wall Street’s expectations, according to a consensus estimate from Bloomberg:
Revenue: $1.9 billion versus $1.88 billion expected
Adj. earnings per share (EPS): $7.46 vs $6.54 per share expected
Sale in the same store: 31.2% vs 29.8% expected
“We remain confident in our key growth strategies and believe they will help us achieve our next target of $3 million average unit volumes with industry-leading return on invested capital that improves as we continue to add Chipotlanes,” said Brian Niccol, Chairman and CEO from Chipotle. in the edition.
“A strong restaurant-level economy coupled with significant restaurant growth should allow us to optimize revenue for years to come.”
Dine-in customers made a strong comeback with restaurant comparable sales up 31.2 percent, but digital sales didn’t take a hit from that uptick. Digital sales accounted for 48.5 percent of revenue, up 10.5 percent from a year ago.
This year, the company plans to open about 200 restaurants.
This quarter, Wall Street is closely monitoring pent-up demand among Chipotle eaters, and the company’s efforts to innovate digitally, particularly updates on its drive-thru “Chipotlanes.”
However, labor availability and higher menu prices are ongoing concerns for both Main Street and Wall Street. At the end of June, the company increased wages to $15 per hour, which was then quickly followed by a 4 percent increase in menu prices. The move comes amid a wide-ranging labor crisis that is pushing up costs across the country.
“We believe that limited prices over the past two years, rising wages and generally rising consumer inflation expectations provide skylight, but Chipotle linked the extra price in the fall quite directly to resistance to the most recent round,” wrote Jon Tower of Wells Fargo in a recent note.
Tower remains overweight Chipotle with a price target change of $1,780 from $1,720.
BTIG director Peter Saleh told Yahoo Finance Live this week that Chipotle may be the first to raise menu prices, but not the last.
“While they are the ones who actually announced it, the rest of the industry is also moving in the same direction we believe,” Saleh said. “You will only see more and more price increases to compensate for this [raising wages]. There is quite a shortage of manpower.”
Overall, Saleh says the average menu price increase per year is “about” 2 percent a year, but expects “to be too big this year” with the potential to be 3 percent or more at most fast food chains.
However, the analyst remains bullish on the stock, reiterating it last month as a “Buy” with a price target of $1,725.
Nicole Miller Regan of Piper Sandler & Co. reiterated Chipotle’s stock as “overweight” with a price target of $2,100 in a note last month, optimistic about Chipotle’s development pipeline of 200 new locations in fiscal 2021.
“While not modeled specifically, we are very encouraged by the continued addition of new core unit development with the build-out of next-generation retail/sales channels,” Regan said in a note last month.
Shares of Chipotle rose after the report and are up 14 percent this year.
Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @Brooke DiPalma or email her at email@example.com. Check out her latest: