Shares of Chipotle Mexican Grill (CMG) tumbled as much as 15% on Thursday after the company slashed its full-year same-store sales forecast for the third consecutive quarter.
The sharp decline extended the stock’s year-to-date losses to roughly 44%.
The selloff marked Chipotle’s steepest one-day percentage drop in 13 years and pushed the stock to its lowest level since March 2023.
Earnings match forecasts but outlook weakens
Chipotle reported third-quarter revenue of $3 billion, up 7.5% year over year, with comparable-restaurant sales increasing 0.3%.
The company posted adjusted earnings of $0.29 per share, in line with Wall Street expectations.
While cost-of-sales efficiencies and last year’s menu price increases helped reduce food, beverage, and packaging costs to 30% of revenue from 31% a year earlier, inflationary pressures, particularly in beef and chicken, and higher labor costs offset some of those gains.
Despite meeting profit expectations, investor sentiment turned sharply negative after management cut its full-year outlook.
Chipotle now expects same-restaurant sales to fall by a mid-single-digit percentage for the year, revising guidance that had already been reduced twice earlier.
In February, the company forecasted low- to mid-single-digit growth, which it later changed in July to flat sales.
Chief Executive Scott Boatwright cited “persistent macroeconomic pressures” as the primary factor weighing on demand, noting that diners, especially those aged 25 to 35, are visiting less frequently.
“We are focused on doubling down on restaurant execution, sharpening our marketing message, accelerating menu innovation, and creating more engaging digital experiences,” Boatwright said on the earnings call.
He noted that same-store sales trends have deteriorated further in October, and the company now expects sales at restaurants open at least a year to decline by a mid-single-digit percentage in the fourth quarter and for the full year.
Boatwright cited factors such as rising unemployment, the resumption of student loan repayments, and slower real wage growth as key contributors to consumers’ reduced discretionary spending.
Analysts warn of persistent sales pressure
The disappointing outlook prompted at least five Wall Street analysts to lower their price targets, citing persistent weakness in customer traffic and limited visibility into a near-term recovery.
The burrito chain’s third-quarter results showed that same-store sales rose just 0.3%, while traffic declined — a combination that raised alarm among investors.
Analysts said the results underscored the challenges facing the restaurant industry as inflation-weary consumers cut back on dining out.
“It’s difficult to call a bottom for sales given the multitude of factors weighing on demand,” said Citi analyst Jon Tower, who cut his price target from $54 to $44 per share.
Similarly, BTIG analyst Pete Saleh described the results as unexpectedly weak, noting that the magnitude of the traffic slowdown caught analysts off guard.
“We’re admittedly perplexed by how suddenly this traffic weakness came about, and not convinced affordability concerns are the main driver here,” Saleh wrote.
Executives said that while Chipotle’s menu items — typically priced around $10 per entrée — remain competitively positioned, some consumers perceive its prices to be closer to the $15 range of higher-end fast-casual competitors.
This perception may be contributing to reduced visit frequency, particularly as inflation pressures persist.
“We are very concerned that the menu and marketing actions taken so far have not sufficiently offset the traffic retraction,” wrote Bernstein analyst Danilo Gargiulo.
Despite the weak outlook, several analysts emphasized that the sales slump reflects broader macroeconomic pressures rather than company-specific missteps.
Industry-wide fallout
Chipotle’s weak results also pressured its fast-casual peers, with shares of Sweetgreen falling 6% and Cava down 8% on Thursday.
Both companies are set to report their own quarterly earnings next week.
Morgan Stanley analyst Brian Harbour dubbed fast-casual restaurants “This Season’s Halloween Scare,” reflecting investor anxiety over slowing consumer traffic and reduced spending in the segment.
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