Chipotle Profit, Forecast Disappoint; Shares Slide

Thursday, 18 Oct 2012 06:03 PM

 

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Chipotle Mexican Grill Inc. on Thursday reported quarterly profit that missed Wall Street's view and said it expects growth in sales at established restaurants to cool in 2013, sending its shares down more than 10 percent after hours.

The Denver-based burrito chain has been one of the restaurant industry's best-performing names, but shares have been weak since this summer - when Chipotle surprised investors with news that the sluggish U.S. economy had slowed growth in its formerly industry-leading same-restaurant sales.

This month, influential hedge fund manager David Einhorn ratcheted up the pressure. He called the chain's stock an attractive "short", saying Chipotle will face significant competition and additional costs.

Chipotle on Thursday forecast flat to low-single digit same-restaurant percentage sales growth for 2013. Its forecast for this year calls for mid-single-digit percentage growth in those sales.

Shares fell 10 percent to $255.75 in extended trading on Thursday, after losing 1.4 percent during the regular session. Chipotle's stock hit an all-time high of $442.34 in April.

 

HOT COMPETITION

Chipotle directly competes with Jack in the Box Inc's Qdoba burrito chain and other upstarts.

Earlier this year Yum Brands Inc's Taco Bell chain, which boasts about 50 percent market share in the Mexican fast-food category, debuted its "Cantina Bell" menu across the United States. That menu is similar to Chipotle's, but priced lower.

Einhorn, who runs $7.7 billion fund Greenlight Capital, said competition from "a resurgent Taco Bell" is a major problem for Chipotle, due to Taco Bell's cheaper menu and its roll-out of new and popular food selections.

Chipotle executives said on a conference call with analysts that the chain is not losing customers to rivals. They also said they don't plan to raise prices to offset higher food costs, although they could opt to do so at a later time.

PROFIT MISS

Net income for the quarter was $72.3 million, or $2.27 per share. Analysts, on average, were looking for a profit of $2.30 per share, according to Thomson Reuters I/B/E/S.

Chipotle reported net income of $60.4 million, or $1.90 per share, a year earlier.

Third-quarter revenue increased 21.5 percent to $2.03 billion.

Sales at restaurants open at least 13 months rose 4.8 percent, just missing analysts' call for a gain of 4.9 percent, according to Consensus Metrix.

Chipotle fired hundreds of workers in 2010 and 2011 after audits by the U.S. Department of Homeland Security's Immigration and Customs Enforcement (ICE) arm turned up undocumented workers on payrolls in Minnesota, Virginia and Washington, D.C.

The U.S. Securities and Exchange Commission, Homeland Security and the federal prosecutor's office for Washington, D.C., are investigating the company's compliance with immigration laws.

© 2014 Thomson/Reuters. All rights reserved.

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