Chipotle Mexican Grill Inc. (Chipotle) joined its peers in witnessing the impact of the COVID-19 pandemic as ongoing crises have shaved off the company’s 16.8% quarterly profits. Stocks of the firm, one of the top gainers in the restaurant sector following a 60% increase, fell as much as six percent after the closing bell.
Sources cite that coronavirus-related expenses, higher beef prices, and delivery cost are the major reasons behind this decreased figure. However, the Mexican restaurant chain recorded a three-fold jump in online sales as most of the consumers preferred to eat at home rather than dining inside restaurants.
As per the third-quarter report, the net income of the company fell by 18.6% to USD 80.2 million. On an adjusted basis, the firm earned USD 3.76/share, beating estimates of USD 3.47. Moreover, the company’s comparable sales increased by 8.3%, beating expectations of a 7.59% increase.
Fast food restaurants – particularly Mexican and Pizza restaurants- have witnessed an increase in sales amid pandemic as consumers preferred comfort food, drive-thru, and pick-up, preferred contactless delivery, and got tired of their cooking at home.
Brian Niccol, Chief Executive Officer of Chipotle stated that the company’s digital sales are expected to surpass USD 2.5 billion in 2020, more than double the amount as compared to 2019.
In mid-September, the company brought back its famous ‘carne asada’ dish for consumers. This move helped the company to increase comparable sales during that period, Chipotle said in the statement adding that the trend continued through October.
As per sources, Chipotle charged an additional USD 1 for its carne asada dish this year, compared with the 50-cent premium the company charged when it introduced in 2019 as a limited-time offering. It also increased menu prices for online delivery items. Considering decreased profit figures, it seems that such a price hike was not enough to offset the higher costs of online delivery and elevated beef prices.
Source credit - https://www.reuters.com/article/us-chipotle-results/chipotle-profit-falls-on-higher-coronavirus-related-expenses-idUSKBN276328
