Chipotle Mexican Grill falls as weak dine-out demand weighs on annual sales forecast

The Chipotle Mexican Grill logo is seen on a storefront in Boston. (AP Photo/Michael Dwyer, File)

Chipotle Mexican Grill’s shares slumped about 10 per cent before the bell on Thursday, as weak consumer spending on dining out led to a bigger-than-expected fall in quarterly sales and caused the bowls and burritos maker to temper its annual sales target.

Consumers, particularly in the lower-income category, are increasingly cooking meals at home as economic uncertainty and sticky inflation prompt them to be more discerning in their spending patterns, driving some market share losses for the company in April and May.

Chipotle focused on ramping up digital and social marketing, as well as promotions through its loyalty program to attract demand, while the launch of a new dip and the extension of the honey chicken item on its menu helped claw back some losses, the company said.

The company now expects annual comparable restaurant sales to be about flat year-over-year, while its prior target was for growth in the low single-digit range.

“We believe Q2 sales miss and lowered annual guidance is reflective of macro headwinds... rather than executional missteps,” Andrew Charles, analyst at TD Cowen, said in a note.

The company is also investing in opening new stores and rolling out store equipment to increase efficiency, which, along with its marketing, should help drive some demand, RBC analyst Logan Reich said.

Chipotle has been more targeted with its price hikes even as menu prices have risen steeply over the past two years as restaurants and fast-food chains took stock of higher supply-chain costs.

Its forward price-to-earnings multiple — a common benchmark for valuing stocks — is 46.65, compared with rivals, including McDonald’s and Domino’s Pizza, which have a P/E ratio of 26.31 and 27.25, respectively.

(Reporting by Juveria Tabassum in Bengaluru; Editing by Shilpi Majumdar)