Chipotle (CMG) investors are digesting Q3 results that missed Wall Street’s sales estimates after a string of winning quarters.
The burrito chain reported $2.78 billion in revenue on Tuesday, up 13% year over year but under the expected $2.82 billion, according to Bloomberg consensus data. Adjusted earnings per share of $0.27 was a 17.4% jump from a year ago, and beat estimates of $0.25.
Same-store sales grew 6%, missing estimates of 6.38%. Its shares dropped 5% after market close.
Interim CEO Scott Boatwright said its food, service, and the return of smoked brisket drove check size, foot traffic, and margin. Chipotle is seeing “strength across all income cohorts even in this competitive environment,” he said on the earnings call.
The company’s value proposition is resonating with diners. The average chicken burrito is under $10, which Boatwright said is a 15% to 30% discount compared to its peer group.
The results come as investors are awaiting the naming of a permanent CEO, after former head honcho Brian Niccol was poached by Starbucks (SBUX) in August.
Initiatives around throughput, or the speed of service, is yielding results, per Wedbush analyst Nick Setyan in a note to clients.
Adding expo — a crew member between salsa and cash register who helps expedite the bagging and payment process — helped add five more orders in a restaurant’s peak 15 minutes. About 60% of the locations have been able to staff the expo position, up from 50% in Q2.
Boatwright said it’s possible to grow Chipotle orders per peak 15 minutes to 30 orders from its current mid-20s pace. Five more orders in that time period could lead to a roughly 1% sales growth, per Setyan.
The company is also testing tools that help with prep work, like a new produce slicer. Its dual-sided grill, which cooks chicken and steak faster, will also be added to 74 more restaurants by month-end.
Its robotic makeline in collaboration with Hyphen and its guacomole prep robot, Autocado are currently being piloted at restaurants in California. Boatwright said both are “highly customized technologies that could provide big unlock for us in the future.”
Chipotle ended Q3 with 3,615 location. In the quarter, it added 86 locations with 73 containing a drive through. It expects to open 285 to 315 new locations this year, and 315 to 345 in 2025 — less than the 358 Wall Street expected.
Long term, it plans to operate 7,000 restaurants in North America. As it expands, it’s been investing in promoting from within.
Wall Street is also keeping an eye out for ongoing ingredient inflation that could potentially justify another price increase in Q4, TD Cowen Andrew Charles wrote in a note to clients prior to results.