Chipotle rang up another bowl of positive earnings on Wednesday afternoon.
For its first quarter, revenue grew 14.1% to $2.7 billion, with same-store sales jumping by 7%, higher than estimates of 5.13%. The company also beat expectations on the bottom line, with adjusted earnings per share coming in at $13.37, compared to estimates of $11.66.
Shares rose 3% in after-market trading.
Limited-time offers like Chicken al Pastor, which is priced at a premium, boosted results against a difficult macro consumer backdrop. The chain saw a 5.4% increase in foot traffic, though the average check was only up 1.6%, lower than the 2.0% expected.
CEO Brian Niccol called the quarter “outstanding,” with improvement in the speed of store service, which encourages more customers to visit. Marketing initiatives like renaming barbacoa to braised beef barbacoa, which showcases its cooking method and meat, also helped boost sales.
Niccol said the chain is seeing “gains with all income cohorts” on the earnings call. “What we hear back from every group is it’s a great value proposition,” he added.
In Q1, Chipotle opened 47 new restaurants, with 43 locations featuring its drive-through Chipotlane. This year, it expects to open 285 to 315 new locations, with more than 80% of them having the drive-through concept. Long term, it plans to operate 7,000 restaurants in North America (there are currently 3,500).
For 2024, the company expects sales growth of mid- to high-single digits, up from the previous guidance of mid-single-digit growth.
The latest results provide “confidence that we can achieve our long-term target of more than doubling our business in North America and expanding internationally,” said Niccol.
Prior to the results, Lauren Silberman of Deutsche Bank wrote in a client note that “Chipotle has been among the best-performing restaurant stocks.”
The company’s operating margin expanded to 16.3%, up from 15.5%, compared to a year ago, while restaurant-level margins also jumped slightly, from 25.6% to 27.5%.
Automation efforts are also in focus. CEO Brian Niccol said the guacamole prep robot, Autocado, and an automated bowl and salad makeline will be in restaurants “later this year as part of the stage process.”
CFO Jack Hartung touched on California in the earnings call. The state’s FAST Act raised fast food wages to $20 as of April 1.
Hartung said Chipotle’s wages in the Golden State increased by nearly 20%, and the company raised menu prices by 6% to 7% to help cover the costs. But Hartung claimed that the chain still offers outsized value, with its chicken burritos going for around $10.
“It’s too early to tell. We’re not seeing any kind of change in consumer behavior yet, but it’s only been a matter of a few weeks so far,” he said.
Prior to the results, analysts agreed that Chipotle is among the companies that have the brand power and fanbase to adjust to the change.
“I think brands who provide a lot of value and have good traffic are best positioned,” said Peter Saleh of BTIG, who pointed out that Chipotle’s chicken bowl averages $9 across the country, compared to $12 to $13 for many burger meals.
“They’ve built quite a bit of momentum in their business with respect to traffic,” Citi analyst Jon Tower told Yahoo Finance.
Here’s what Chipotle reported in Q1, compared to what Wall Street expected, according to Bloomberg estimates:
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Revenue: $2.70 billion versus $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% versus 5.13%
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Transactions growth: 5.4% versus 3.03%
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Average check growth: 1.6% versus 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 bdipalma@yahoofinance.com.
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