Chipotle Sales Surge as It Draws More Customers

Higher costs for beef, avocados and cheese as well as higher litigation costs ate into profit.

Apr 17, 2014 at 12:03PM

Mexican food chain Chipotle reported a higher quarterly profit Thursday as more customers flocked to its restaurants for burritos, bowls and tacos.

The Denver-based chain's popularity has kept growing because people like that they can pick what toppings to put on their orders as they walk down an assembly line. The chain's "Food with Integrity" slogan is also intended to underscore the higher quality of its ingredients, in comparison to traditional fast-food chains such as Burger King and Wendy's.

First-quarter results indicate its popularity isn't fading: Sales at established locations rose 13.4%, driven in part by an increase in customer traffic. Higher costs for beef, avocados and cheese as well as higher litigation costs ate into profit and earnings missed expectations.

Chipotle Mexican Grill said net income rose to $83.1 million, or $2.64 per share, for the three months ended March 31. That's up from $76.6 million, or $2.45 per share, a year ago. Analysts expected $2.86 per share.

Revenue climbed 24% to $904.2 million from $726.8 million a year ago. Analysts expected revenue of $872.9 million.

The company has been mulling whether it can raise prices later this year without scaring off customers. It forecast revenue in stores open at least one year will rise in the high single digits for 2014, but said that excludes any menu price increase.

Chipotle has also been expanding rapidly. It opened 44 restaurants during the quarter and plans to open 180 to 195 restaurants during all of 2014.

Its shares climbed $25.39, or 4.6%, to $577.79 in morning trading. Its share are up almost 70% since a year ago.

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The Motley Fool recommends Burger King Worldwide and Chipotle Mexican Grill. The Motley Fool owns shares of Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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