Chipotle stock rises as the Mexican burrito chain shifts focus to restoring customer traffic

Reuters, October 29 - In premarket trading on Thursday, Chipotle Mexican Grill (CMG.N) shares rose 7%, indicating that CEO Scott Boatwright's efforts to attract customers back through new menu launches and enhanced marketing are beginning to show results.

The company’s executives said during the earnings call on Wednesday that the burrito chain expects same-store sales to grow by about 3% to 4% this quarter, above the 2.1% increase (link) in the three months ended September.

Details are as follows:

• Earlier this week, the company announced it would bring back smoked brisket as a limited-time offer starting November 5 to catch the holiday season and football season

• Facing higher beef prices and soaring diesel prices (link), which have led to increased freight costs, Chipotle plans to raise menu prices by about 3% in the fourth quarter

• Third quarter operating margin fell from 15.9% a year earlier to 13.7%, and adjusted earnings per share were 27 cents, missing market expectations

• “We underestimated Chipotle’s willingness to sacrifice margin and increase marketing spending to drive same-store sales growth,” said TD Cowen analyst Andrew Charles

• At least four brokerages have lowered their price targets for the stock

• Jefferies analysts said that although there are signs of traffic stabilizing, a tougher macro environment could delay a meaningful sales recovery

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