Chipotle CEO Scott Boatwright talks Q2 results as stock sinks more than 10%
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Yahoo
an hour ago
- Yahoo
Chipotle Shares Slide on Weak Same-Store Sales. Time to Buy the Dip or Run for the Hills?
Key Points Chipotle saw its same-store sales decline for the second straight quarter. As a result, the company lowered its forecast and now expects flat comparable-restaurant sales for the year. While the company is currently struggling, much of this looks macro-related, which could make the dip a good buying opportunity. 10 stocks we like better than Chipotle Mexican Grill › Chipotle Mexican Grill (NYSE: CMG) has long been one of the most popular fast-casual restaurant chains around, but this year, the company has been struggling to bring in the same type of customer traffic to its restaurants that it's used to. After not seeing a same-store sales decline since 2020, which was early during the COVID-19 pandemic when people were staying home and businesses were shuttered, the company just reported its second straight quarter of comparable-store-sales decreases when it announced its Q2 results on July 23. The weakness started back in January and continued into the spring. With the stock now down 24% in 2025 as of July 24, let's see if this dip is a buying opportunity or if investors should run for the hills. Traffic declines After seeing its comparable-restaurant sales fall 0.4% in Q1, the weakness continued, with Chipotle seeing a 4% decline in Q2. Transactions sank 4.9%, while its average check size rose 0.9%. The company called out May as being particularly weak, but it then began to see a rebound in June, with comparable sales and traffic turning positive. It credited the launch of its limited-time Adobo Ranch dip offering and "Summer of Extras" reward program for the improvement. It said that while July has been choppy, the positive comp and transaction trends have continued. It also called out the strong performance of its Chipotle Honey Chicken limited time offering, saying it accounted for one out of every four orders. Despite the recent rebound, the company lowered its full-year same-store outlook. It now expects comparable-store sales to be flat compared to an earlier outlook of low single-digit growth. However, the company does believe it can still generate mid-single-digit comparable-restaurant sales over the long term. Management does not believe it's making any missteps, with its recent struggles more a result of shifts in consumer sentiment. Overall, Chipotle grew its revenue by 3% to $3.06 billion in the quarter, while adjusted earnings per share (EPS) fell 3% to $0.33. Analysts were looking for adjusted EPS of $0.33 on revenue of $3.11 billion, as compiled by LSEG. Restaurant-level operating margins dipped 150 basis points to 27.4%. This is an important metric, as it measures how profitable each individual restaurant is. The drop appears largely due to higher wage costs and sales deleveraging, as the company said that supply chain and in-restaurant initiatives have more than offset the declines from increasing portion sizes that had been too small. Last year, a number of viral videos called out some locations for skimping on portion sizes, which the company decided to remedy. It said about 30% of its restaurants needed to be retrained on correct portion sizes. Chipotle's goal is to return restaurant-level margins back to the 29% to 30% range in the future, while driving average unit volumes (average yearly sales of an individual restaurant) above $4 million. Is it time to buy the dip? There is no doubt that Chipotle is going through a difficult stretch. The big question is whether this is self-inflicted, or whether this is largely due to a more difficult consumer environment, or perhaps a combination of the two. My guess is it's a little bit of both. There is good evidence that consumers have been a bit more cautious given all the tariff talk and some higher prices. However, I've been to a few Chipotle restaurants this year that have had trash receptacles overflowing and dirty tables, which made me not want to eat there. This is just anecdotal, but if it's more widespread, it could certainly turn some customers off. However, I think it might be easy to fix this issue. Meanwhile, the company still has a long growth runway. It's still really just starting to expand internationally, and it continues to believe it can increase its U.S. locations at an 8% to 10% annual rate. So while Chipotle has certainly become a large operation, it still has plenty of growth ahead. From a valuation standpoint, the stock now trades at a forward price-to-earnings (P/E) multiple of about 38 based on 2025 analyst estimates and 32 based on 2026 estimates. That's not in the bargain bin, but it's cheaper than where it's traded at over the past few years. At this point, while I think there is some room for improvements, I don't think the long-term Chipotle story has changed. I really like its international and continued expansion opportunity, and its core menu and limited time offerings continue to resonate with customers. Consumers still respond to its marketing, and I think it can get back to solid same-store sales growth in a more normal environment. As such, I'd think investors with a long-term outlook can confidently continue to accumulate shares at current levels. Should you invest $1,000 in Chipotle Mexican Grill right now? Before you buy stock in Chipotle Mexican Grill, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Chipotle Mexican Grill wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,063,471!* Now, it's worth noting Stock Advisor's total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 21, 2025 Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends the following options: short September 2025 $60 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy. Chipotle Shares Slide on Weak Same-Store Sales. Time to Buy the Dip or Run for the Hills? was originally published by The Motley Fool Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Fast Company
10 hours ago
- Fast Company
Beef costs, burrito blues, and boarding groups: The business stories everyone's talking about this week
If this past week's headlines are any indication, the U.S. consumer economy is being pulled in every direction at once. Grocery bills are getting heavier, while retail giants and airlines are rewriting some of their most familiar playbooks. At the same time, the housing market is cooling in dozens of major metro areas, Chipotle is feeling the sting of diner belt-tightening, and the late-night TV world is suddenly united in a war of words over CBS's surprise cancellation of The Late Show With Stephen Colbert. In grocery, one of the country's quirkiest retailers is on a tear: Trader Joe's announced 30 new store openings across 17 states and D.C., pushing the grocer closer to the 600-location mark. Meanwhile, if you were planning to load up on burger patties for the summer, brace yourself. Beef prices have surged to the highest levels on record, and there's no quick fix in sight as the U.S. cattle herd hits its lowest level since 1951. Elsewhere, big companies are making moves: Target is scaling back its popular price-match policy, Southwest Airlines is ditching open seating in favor of assigned boarding groups, and Chipotle's latest earnings reveal that even fast casual isn't immune to shifting consumer spending. Here's what you need to know from this week in business: Trader Joe's expands with 30 new stores across 17 states Trader Joe's is in growth mode, adding 30 new locations that will push it past 600 stores nationally. The expansion—spanning California, Texas, New York, Oklahoma, and more—is a striking contrast to the wave of retail closures hitting other chains. The next to open: Northridge, CA, on July 21. Beef prices hit record highs Ground beef now averages $6.12 a pound, with steak prices rising 8% to $11.49 per pound. Persistent droughts, shrinking cattle herds, and new trade disruptions mean grilling season is going to stay expensive for the foreseeable future. Colbert cancellation spurs late-night revolt CBS's decision to cancel The Late Show by 2026 has united late-night hosts, who are openly mocking the network and its corporate parent. Many see the timing—just after Colbert criticized a Trump-related settlement—as politically charged. Target scales back price-matching Starting July 28, Target will only match prices found at other Target locations or on ending its longstanding policy of matching major competitors like Amazon and Walmart. Chipotle feels the pinch as diners spend less Chipotle's stock fell 12% after its second-quarter results revealed slowing comparable sales. The company blames macroeconomic pressures and says low-income diners are prioritizing value. Housing market cools in 109 metros More than a third of the nation's 300 largest housing markets saw year-over-year price declines in June, with Austin, Tampa, Dallas, Miami, and Phoenix leading the drop. Southwest Airlines ends open seating Southwest's famed open-seating policy is ending. Starting July 29, passengers will purchase tickets with assigned seats and board using an eight-group system, a major brand shift for the carrier. McGraw Hill goes public McGraw Hill, the 137-year-old education publisher known for its textbooks and digital learning platforms, made its debut on the New York Stock Exchange this week under the ticker 'MH' at $17 per share. The IPO raised roughly $386 million, valuing the company at about $3.25 billion as it shifts its focus from print to digital education. Trump's 'Big, Beautiful Bill' Tax Cuts: Winners and Losers
Yahoo
12 hours ago
- Yahoo
Diners Still Want Value. So Why Are Full-Service Restaurant Visits Up?
Americans' appetite for eating out is evolving. An uncertain economy is weighing on chain restaurants, Chipotle and Domino's executives said this week. But people are still dining out, according to foot traffic and bank card data. And more Americans are opting for a full-service experience, perhaps as a way to treat themselves while otherwise cutting back, Bank of America said. Domino's Pizza (DPZ) CEO Russell Weiner this week spoke of "tough times" in the business. In the quick-service sector, average visits per shop fell 1% year-over-year in the second quarter, according to which tracks foot traffic. Customers focusing more on the total price of their orders is part of what held back Chipotle Mexican Grill (CMG) last quarter, CEO Scott Boatwright said this week. More diners ordered chicken rather than pricier options like steak or barbacoa, CFO Adam Rymer said, though side order sales held steady. Comparable store sales slipped 4% year-over-year, the burrito chain said. "Whether it's pizza or burgers or QSRs in general, there is pressure because consumers are looking for value,' Weiner said during a conference call, according to a transcript from AlphaSense. Boatwright noted the continued popularity of value meals and interest in snacks—which may appeal to diners interested in smaller orders, but also those looking to spend less—in the industry. 'Much of what we're experiencing right now is due to macro and the consumer—the low-income consumer—is looking for value as a price point at present,' Boatwright said, according to a transcript. Americans May Be Looking for 'Fewer, More Meaningful' Dining Experiences Chipotle's results may be suffering because it has opened new shops near existing stores, JPMorgan said, while describing the brand as having a 'heightened sensitivity to short-term fluctuations in consumer confidence.' On average, visits per fast-casual spot were similar to what saw in the second quarter last year. The segment, along with coffee shops and fine dining restaurants, has benefitted from a bifurcation towards both high-end and budget options, said in a mid-year report. Meanwhile, casual dining chains like Red Lobster and Applebee's have shrunk in recent years as 'consumers trade down to lower-priced options or visit higher-end venues for special occasions,' the report said. Americans may be looking for 'fewer, but more meaningful' dining experiences, Bank of America said after noticing people ate less at quick-service restaurants and more at full-service establishments in June compared to a year prior. 'The first pull back in spending could come in the number of trips, but not necessarily money spent,' Bank of America said. American Express (AXP) cardholders spent 8% more at restaurants in the second quarter than they did in the first, the company said last week, while highlighting a decline in travel-related expenses. 'We live in uncertain times," CEO Stephen Squeri said on a conference call. "But I think people are continuing to live their lives." Read the original article on Investopedia Sign in to access your portfolio
