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Chipotle profit heats up as it draws more diners
Friday - 10/18/2013, 8:00am EDT
AP Food Industry Writer
NEW YORK (AP) -- Chipotle keeps attracting more customers with its burritos, bowls and carefully-honed image as an anti-fast food option.
The Denver-based company on Thursday said its profit surged 15 percent in the third quarter as higher traffic drove up a key sales figure. It issued a rosier sales outlook for the remainder of the year and said a national price hike was planned for 2014, which would be its first in three years.
In a conference call with analysts, Chief Financial Officer Jack Hartung said the increase would probably be in the "mid-single digit range."
"Whether that's 3 percent, 4 percent or 5 percent will depend on what happens with general ingredient inflation," he said.
Chipotle, which has more than 1,500 locations, has surged in popularity because customers see it as being a step up from traditional fast-food chains such as Burger King and Wendy's. People also like that they can customize their orders, dictating which ingredients they want as they go down a line.
The company's 6.2 sales increase at established locations is in contrast to the performance of several other major food companies in recent quarters, which have cited the challenging economy for underwhelming results.
Starbucks also seems insulated from such outside factors, having reported a surprisingly strong 9 percent sales increase at locations open at least a year in its most recent quarter.
As for Chipotle, the chain's "Food With Integrity" ethos has helped it cultivate a powerful marketing message. It recently generated buzz online with a cartoon video depicting a dystopian world where big food companies fatten chickens with injections and keep cows stuffed in crates. By contrast, the video depicted Chipotle's food as being homemade from fresh ingredients.
The video got more than 7 million hits on YouTube.
During the third quarter, the company also removed bacon from its pinto beans to make them accessible to a wider customer base. And it expanded its new "Sofritas" tofu option to about 25 percent of its stores, with plans to have it in about 40 percent of its stores by the end of the year.
As for the price hike, the company said it was in part to cover rising ingredient costs and a previously announced push to switch to ingredients that are free of genetically modified organisms. That shift doesn't include soft drinks and meat, and Chipotle said most of its ingredients are already GMO-free. The company is primarily working on changing its cooking oils and flour tortillas.
Still, Hartung noted that it would be "pretty exciting" to accomplish its goal of removing GMOs from its ingredients and that the company would like to time its price increase with that sense of excitement.
For the quarter, Chipotle Mexican Grill Inc. earned $83.4 million, or $2.66 per share. That's up from $72.3 million, or $2.27 per share, a year ago. Analysts expected $2.78 per share, on average.
Revenue rose 18 percent to $826.9 million, topping the $820.3 million analysts expected, according to FactSet.
For the year, the company said it expects sales at restaurants open at least a year to grow by a mid-single-digit percentage, up from its previous forecast range of low-single to mid-single digits. It said sales for the fourth quarter were on track to be similar to or better than the latest quarter.
For 2014, it forecast low-single-digit growth, excluding any menu price increases.
Its stock rose more than 8 percent to $439.07 in after-hours trading. Over the past year, the stock is up more than 51 percent.
Follow Candice Choi at www.twitter.com/candicechoi
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