Chipotle Mexican Grill Inc.
CMG 1.33%
said that higher costs associated with labor cut into its profit in its most recent quarter, while sales were depressed during the holidays.
The burrito chain said Tuesday that staff sick pay and medical expenses contributed to elevated costs during its fourth quarter. The company reported per-share earnings adjusted for one-time items of $8.29 for the period that ended Dec. 31, below analysts’ expectations of $8.91 per share, according to FactSet.
Net income of $223.7 million was up 68% compared with the same period in 2021.
The Newport Beach, Calif.-based company said comparable restaurant sales grew 5.6% compared with the same period in 2021. Revenue increased 11% to $2.18 billion, slightly below analysts’ expectations.
Chipotle said that its sales softened in December during the holidays, and a new steak dish didn’t drive as many orders as executives had hoped. Slower retail sales during the holidays likely contributed to fewer people going out to eat while shopping, executives said.
“We just didn’t see that pop, that momentum that we normally see,” said Chipotle Chief Financial Officer
Jack Hartung
said during an investor call. “We started the quarter soft and we ended the quarter soft.”
Chipotle said higher menu prices helped offset food costs, although expenses increased for dairy and tortillas. Sales improved in January and have continued to move upward in its first quarter, the company said.
Chipotle’s shares fell 4.58% to $1,644 in after-hours trading.
Chipotle said recently that it planned to hire 15,000 people in the U.S. as it opens more locations and prepares for a surge in orders in the coming months.
Photo:
Taylor Glascock/Bloomberg
Restaurants in recent weeks have reported that sales held up in their most recent quarters, but a number of companies have noted increased costs.
Starbucks Corp.
last week said that new cafe equipment and higher wages for employees cut into store-level profits.
Chipotle said its menu prices in its fourth quarter were around 13.5% higher than the same period last year. The company said it hasn’t made any decisions on boosting prices this year, and is closely monitoring inflation and the economy. Executives said they have no current plans to further increase prices.
“Hopefully it will just level off,” Mr. Hartung said in an interview. “We’d love to just be patient and sit back.”
Chipotle said it was focusing on the basics of running its restaurants, including moving toward more in-person training for workers and away from virtual education. The company said that staffing levels have improved from two years ago.
The chain said last month that it plans to hire 15,000 people in the U.S. as it opens more restaurants and anticipates an uptick in orders in the coming months.
Mr. Hartung said sales among higher-income consumers are holding up, but some with lower incomes have taken more of their meals at home.
—Kathryn Hardison contributed to this article.
Write to Kathryn Hardison at [email protected]
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Appeared in the February 8, 2023, print edition as ‘Higher Labor Costs Hit Chipotle Profit.’
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