Chipotle Q4 earnings largely meet Wall Street estimates, shares drop on conservative guidance

Chipotle (CMG) had to fight off multiple headwinds to meet expectations for its fourth quarter. The burrito chain contended with inclement weather and tough comparisons to its second quarter, where its chicken al pastor boosted results. Same-store sales for its fourth quarter and full-year earnings, which came out Tuesday after market close, jumped 5.4% and 7.4%, respectively. New CEO Scott Boatwright, who reported to former CEO Brian Niccol as chief operations officer since 2017, said in an earnings call that the company delivered "strong transaction" driven sales growth each quarter and expanded margins. For fiscal 2025, the company expects same-store sales to increase in the low- to mid-single-digit range, which takes into account the "progressively tougher" year-over-year comparisons, CFO Adam Rymer said.

This fiscal year, the company also plans to open between 315 and 345 locations. The chain has over 3,700 restaurants and aims to reach 7,000 in North America. This is the first guidance set under Boatwright. The Street seems to find it conservative — Stifel's Chris O'Cull expected full-year same-store sales growth in the mid-single-digit range, keeping with Wall Street consensus estimates of 5.3%, he wrote in a note to clients. Shares of Chipotle dropped 5% in after-hours trading.

Earnings estimate breakdown Here's what Chipotle posted for its fourth quarter results, compared to Bloomberg consensus estimates: Adjusted earnings per share: $0.25 versus $0.25 Revenue: $2.85 billion versus $2.85 billion Same-store sales growth: 5.4% versus 5.67% Average check growth: 1.4% versus 1.29% Traffic growth: 4% versus 4.41% For the full fiscal year, here's what Chipotle reported, compared to Bloomberg consensus estimates: Adjusted earnings per share: $1.12 versus $1.12 Revenue: $11.3 billion versus $11.32 billion Same-store sales growth: 7.4% versus 7.4% Average check growth: 2.1% versus 1.99% Traffic growth: 5.3% versus 5.45% Rymer said guidance doesn't include the potential impact of tariffs. The Trump administration announced a 25% tariff on Mexican and Canadian imports, set to take effect in about a month's time, and an additional 10% tariff on China. Per Rymer, only 2% of Chipotle's cost of sales come from Mexico, "which includes avocados, tomatoes, limes, and peppers." Half of its avocados are from Mexico, with the other half coming from Colombia, Peru, and the Dominican Republic. It sources less than 0.5% from Canada and China. "If the recently announced tariffs go into full effect, it would have an ongoing impact of about 60 basis points on our cost of sales," he said.

Story Continues In the quarter, food, beverage, and packaging costs accounted for 30.4% of total revenue, a jump from 29.7% the year prior. The increase was from "the company's effort to ensure consistent and generous portions," a protein mix shift due to its Smoked Brisket offering, and "to a lesser extent, inflation across several items including higher avocado and dairy costs."Workers help a customer at a Chipotle restaurant on April 1, 2024, in San Rafael, Calif. (Justin Sullivan/Getty Images)·Justin Sullivan via Getty Images The company raised prices by 2% in December, and Boatwright projects steady prices for 2025, with a few caveats. "If there were something that came up throughout the year that would be a permanent hit to the business in the form of inflation, we would consider taking price," he said. The release of Chipotle Honey Chicken as a limited-time offering has Wall Street excited.

Boatwright called the pilot "a success." He hinted that the chain typically launches limited-time offerings around mid- to late March. Deutsche Bank analyst Lauren Silberman called "concerns on underlying fundamentals ... overblown" in a note to clients. She added that the team expects "strength to continue in 2025, supported by a strong innovation and marketing pipeline." •USD (CMG) Follow View Quote Details Throughput also remains "one of the most meaningful multi-year traffic drivers," she wrote. In October 2023, Chipotle and Hyphen introduced a digital makeline, in which a burrito bowl or salad travels along a conveyor belt while the system automatically dispenses each ingredient into the bowl.

The process is currently in the testing phase in Southern California restaurants. Boatwright said previously the company "fully [intends] to leverage that automation" to fulfill online orders, which make up 65% of bowl and salad orders. It only takes the makeline 30 to 60 seconds to complete a bowl, freeing up employees to work on burritos or in-store orders. In September 2024, it added Autocado, a robot that peels and cores avocados for guacamole, to local testing. Other new equipment includes produce slicers, dual-sided grills that reduce chicken and steak cooking time by half, rice cookers, and dual-backed fryers that double the capacity for frying chips.

Locations that open in the back end of the year will have the new equipment. "If successful, we're seeing the returns we were looking for ... we'll work through how we retrofit the existing fleet of restaurants," Boatwright added. — Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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