Chipotle reported higher third-quarter revenue and a third straight quarter of positive comparable-restaurant transaction growth, supported by new locations and modest same-store gains. Profitability weakened, however: operating and restaurant-level margins narrowed, and diluted earnings per share fell 6.9% from a year earlier.
The company also continued expanding its restaurant base, including through international partners, while digital sales grew as a share of food and beverage revenue.
Key details
- Revenue rose 9.6% to $3.3 billion. New restaurant openings were the main driver, with comparable-restaurant sales also contributing.
- Comparable sales increased 2.1%. Average check was up 1.3% and transactions rose 0.8%, marking a third consecutive quarter of positive transaction growth.
- Digital sales reached 38.8% of food and beverage revenue, up from 36.7% in the year-earlier quarter.
- Margins declined. Operating margin fell to 13.7% from 15.9%. Restaurant-level operating margin decreased to 23.3% from 24.5%.
- Diluted earnings per share were $0.27, down 6.9% from $0.29 a year earlier. Adjusted diluted EPS was also $0.27, a 6.9% decline.
- Food, beverage and packaging costs eased to 29.5% of revenue from 30.0%. Chipotle attributed the improvement mainly to menu price increases, tariff relief and a favorable mix of limited-time offers. Inflation, particularly in beef and freight, and higher protein usage partly offset those benefits.
- Labor costs increased to 25.7% of revenue from 25.2%. The company attributed the increase to lower sales volumes and higher employee compensation.
- Chipotle opened 84 company-operated restaurants, 53 of them with a Chipotlane, and five international partner-operated restaurants. The company said Chipotlanes are helping improve convenience and guest access, as well as new-restaurant sales, margins and returns.
- Chief Executive Scott Boatwright pointed to menu and digital innovation, a rollout of high-efficiency equipment and entry into three new markets as elements of the company’s growth strategy.
What changed
Chipotle’s sales grew, but the margin and earnings figures show that higher revenue did not translate into higher per-share earnings this quarter. Comparable sales growth included both higher average checks and more transactions, while restaurant openings remained the largest stated source of revenue growth. The increase in digital sales share and continued Chipotlane openings were additional features of the company’s operating mix and expansion.