Chipotle shares cratered 15% Thursday after the burritos-and-bowls chain reported a decline in store traffic and slashed its sales forecast.
Net sales at the fast-food chain jumped 7.5% to $3 billion in the third quarter, just a tad below Wall Street estimates of $3.03 billion.
But CEO Scott Boatwright warned the chain is struggling to hold onto its customers amid “persistent macroeconomic pressures.”
He specifically called out unemployment, student loan payments and slower wage growth compared to sticky inflation, which are hammering consumers aged 25 to 35 – a key base for Chipotle.
“We tend to skew younger and slightly over-indexed to this group relative to the broader restaurant industry,” Boatwright said during a Wednesday earnings call.
Store visits tumbled 0.8% for the third straight quarter of declines.
The company slashed its annual same-store sales forecast to a decline in the low-single-digit range. That’s far below its previous forecast of growth by a low- or mid-single-digit percentage.
“We’re not losing that customer. They’re just coming less often,” Boatwright said.
Chipotle reported net income of $382.1 million, or 29 cents per share, down from $387.4 million the previous year. Excluding adjustments for stock-based grants and other items, the company still earned 29 cents per share.
The fast-food industry has been struggling to claw back customers after the pandemic as high prices push Americans to dine out less often.
That effect has been delayed for Chipotle, which caters to a higher-income customer base who have been able to keep spending.
But consumers making less than $100,000 – about 40% of Chipotle’s customers – have drastically cut back on dining at restaurants due to economic fears, Boatwright said.
Same-store sales ticked up 0.3% in the third quarter, a reversal from last quarter. That growth in sales, however, came from a 1.1% bump in the average check price, not from traffic, which fell.
Still, Boatwright insisted the chain does not need to turn to discounting – claiming customers are simply lumping the chain in with other fast-casual competitors, even though Chipotle has a cheaper $10 average price point.
Instead, the company will focus on its in-restaurant and digital experiences, marketing and new menu items, Boatwright said.
Next year, Chipotle plans to open 350 to 370 new restaurants, including 15 international locations run by partners.
The company has announced deals with operators in South Korea, the Middle East and Latin America as it continues a global expansion push.
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