IBD 50’s Chipotle Beats Despite Rising Food Costs
Food costs rose faster than menu prices, pinching margins at burrito chain Chipotle Mexican Grill. But strong new-opening sales and an 11.3% same-store sales gain boosted earnings above Wall Street’s third-quarter estimates.
Chipotle (CMG) earned $1.90 EPS, 25% above a year ago, and 5 cents higher than views. Revenue rose 24.1%, to $591.9 million. But rising commodity prices pushed food costs to 33.1% of sales, from 30.6% a year ago. Operating margins decreased by a full percentage point. Shares of the IBD 50 company were up 4% after hours.
Also Thursday night, the pizza and brewery chain BJ’s Restaurants (BJRI) matched Q3 EPS forecasts for 24 cents, 20% above a year ago. Revenue increased 17.6% to $151 million, slightly over estimates, with revenue from restaurants open more than a year up 6.5%. Shares fell after hours.
In a statement, BJ’s CEO Jerry Deitchle called the same-store growth “an impressive accomplishment for any casual dining restaurant company in this difficult operating environment.”
Darren Tristano, executive vice president of the restaurant consulting firm Technomic, expects restaurants across the board to institute 2.5% to 3% menu hikes this year, and to push for the same in 2012. They would ask for more, but with unemployment high and the economy still shaky, consumers might not stomach it.
“All the growth will likely be in price increase and not in higher traffic, or more spending from the consumer,” Tristano says.
Earlier this week, Buffalo Wild Wings (BWLD) and Cheesecake Factory (CAKE) both pushed menu price increases. Buffalo rose about 7% Thursday after its strong results out late Wednesday. Cheesecake edged up less than 1% a day after missing views.
Burger giant McDonald’s (MCD) raised prices earlier this year and could do so again when it reports Friday.