Chipotle posted another positive profit on Wednesday afternoon.
First-quarter sales rose 14.1% to $2.7 billion, with same-store sales up 7% and beating expectations of 5.13%. The company also beat expectations for its bottom line, with adjusted earnings per share of $13.37 versus expectations of $11.66.
Shares rose 3% in post-market trading.
Limited-time sales such as premium-priced Chicken Al Pastor boosted performance against the backdrop of a difficult macro consumption environment. The chain saw foot traffic increase by 5.4%, but average check growth was only 1.6%, below expectations of 2.0%.
CEO Brian Nicol called the quarter “excellent” for improving the speed of store service and driving more customer traffic. Marketing strategies such as changing the name of barbacoa to stewed beef barbacoa and introducing its cooking method and meat also contributed to the increase in sales.
In an earnings call, Mr. Nicol said the chain was “profitable across all income groups.” “We're hearing from all groups that this is a great value proposition,” he added.
In the first quarter, Chipotle opened 47 new restaurants, including 43 with drive-thru Chipotle Lanes. The company expects to open between 285 and 315 new stores this year, more than 80% of which will feature a drive-thru concept. In the long term, he plans to operate 7,000 restaurants in North America (currently he has 3,500).
The company expects sales growth in 2024 to be mid-to-high single digits, above its historical mid-single digit growth rate.
The latest results “give us confidence that we can achieve our long-term goals of more than doubling our operations in North America and expanding internationally,” Nikkor said.
“Chipotle is one of the best-performing restaurant stocks,” Lauren Silverman of Deutsche Bank wrote in a note to clients ahead of the earnings release.
The company's operating margin expanded to 16.3% from 15.5% a year ago, and restaurant-level margins also rose slightly from 25.6% to 27.5%.
Efforts toward automation are also attracting attention. CEO Brian Nicol said the guacamole-cooking robot Autocado and automated bowl and salad make lines will be introduced to restaurants “as part of a phased process later this year.”
CFO Jack Hartung mentioned California during the earnings call. The state's FAST Act increases fast food wages to $20 starting April 1.
Hartung said Chipotle's wages in the Golden State have increased by nearly 20%. And the company increased menu prices by 6% to 7% to cover costs. But Hartung maintained that the chain still offers great value, with chicken burritos costing about $10.
“It's too early to tell. We haven't seen any change in consumer behavior yet, but it's only been a matter of a few weeks so far,” he said.
Before the results were released, analysts agreed that Chipotle was one of the companies with the brand strength and fan base to adapt to change.
“I think the brands that offer a lot of value and have a lot of traffic are in the best position,” said Peter Saleh of BTIG, adding that many burger menu items cost between $12 and $13. He noted that a Chipotle chicken bowl averages $9 nationwide.
“They've built quite a bit of momentum in the business in terms of traffic,” Citi analyst John Tower told Yahoo Finance.
Here's how Chipotle reported in the first quarter compared to Wall Street's expectations, according to Bloomberg estimates.
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Revenue: $2.7 billion vs. $2.67 billion
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Adjusted earnings per share: $13.37 vs. $11.66
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Same store sales growth: 7% vs. 5.13%
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Increase in transactions: 5.4% vs. 3.03%
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Average increase in checks: 1.6% vs. 2.00%
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter @brooke di palma Or email bdipalma@yahoofinance.com.
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