Chipotle CEO says chain has no plans to raise prices amid consumer pullback

Yahoo

23-04-2025

Chipotle (CMG) won't raise the prices of chicken burritos or guac and chips as it tries to navigate fragile consumer sentiment and a trade war.
The burrito chain missed expectations on revenue and same-store sales in its first quarter report on Wednesday after market close. It posted its first decline in same-store sales since 2020, while transactions decreased 2.3%, the largest drop since 2022.
In an interview with Yahoo Finance, CEO Scott Boatwright said the company does not plan to raise prices "anytime in the near future," given the state of the consumer.
He explained the company needs to see which components of the tariffs "will be transitory, which will be permanent, and we'll take a pricing action when it's right and appropriate." The company has to evaluate the full impact before deciding if they're a permanent hit to the business.
However, if need be, Chipotle "absolutely" has the power to adjust prices.
"We have pricing power at Chipotle that I believe is unparalleled, and we view that pricing power as an asset ... we can choose to spend that asset when we want to. Given the strength of our balance sheet and the strength of our economic model, that gives us the opportunity to be patient," Boatwright said.
As tariffs reignited concerns for inflation, investors have been dumping shares of fast-casual chains for fast food giants, a reversal of recent trends.
Year to date, fast-casual stocks like Chipotle, Sweetgreen (SG), and CAVA (CAVA) are down 19%, 42%, and 23%, respectively. Shares of McDonald's (MCD) and Yum! Brands (YUM) are up nearly 10% and 9%, respectively.
Chipotle stock dropped 2% in after-hours trading.
Investors are weighing potential risks like exposure to avocado costs, ongoing wage inflation pressure (including from fast food minimum wage laws like the FAST Act), intense competition, and "economic sensitivity," per William Blair analyst Sharon Zackfia.
Inflation-weary diners have already been turning to lower-cost options. According to KPMG's March consumer pulse survey, 26% of respondents visited fast food and quick service restaurants more often over the past year, whereas 38% were choosing casual dining less often.
When asked about Chipotle's value proposition, Boatwright said the average cost of a chicken burrito or bowl is still under $10 nationally.
"We are a 10% to 20% discount to QSR today, and oftentimes a 10% to 20% discount to our fast casual peer group," he said, adding that consumers are still splurging on sides like queso or chips.
CFO Adam Rymer said on Chipotle's earnings call that "dinner has been holding up better than lunch recently."
There are currently 27 Buys, nine Holds, and zero Sell ratings on Chipotle's stock. Analysts have cited improved throughput and value as potential drivers of growth.
The immediate impact of tariffs on food costs may be muted. Only 2% of Chipotle's total sales come from Mexico, which includes about 50% of its avocados, plus tomatoes, limes, and peppers, per the company.
Mexican tomatoes, which likely make up 1% of Chipotle's cost of goods, per TD Cowen analyst Andrew Charles, would be subject to a 21% tariff starting July 14.
Boatwright said the impact on tomatoes would be small and "something we can absorb if those tariffs go into place." He noted the company could raise menu prices later if consumer sentiments recover. But before they increase prices, they could "look for other offsets within the P and L to offset some of those margin impacts."
The company expects to see commodity inflation and labor inflation increase by low single digits this year.
The former high-flying stock will need to keep expanding to satisfy investor appetite. This year, it plans to open between 315 and 345 locations, with a goal of 7,000 in the US and Canada long term. There are currently 3,700 locations.
Boatwright said it will forge ahead with unit growth.
"As we dig into specifically what's going on with the Chipotle consumer ... we're not seeing a loss of customers. What we are seeing is a convenience challenge, meaning we need to build more restaurants as quickly as we can to get to our 7,000 restaurants in North America," he said.
Baird analyst David Tarantino said a potential risk is its "aggressive growth strategy," which "requires Chipotle to execute an active development schedule while managing existing operations."
He added that "consistent performance depends on finding suitable locations and quality staff."
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on X at @BrookeDiPalma or email her at [e-mail].
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