It hasn't been smooth sailing for Chipotle Mexican Grill (CMG 1.32%) following the departure of its highly regarded CEO in the fall of 2024, as the fast-casual Tex-Mex restaurant operator has struggled with comparable-store sales growth ever since. However, the company gave investors some good news when it reported its first-quarter (Q1) results -- a surprise uptick in same-store sales.
Let's dive into its quarterly results and prospects to see if this could be the start of a turnaround.
NYSE: CMG
Key Data Points
A ray of hope
After seeing its same-store sales sink by 2.5% in the fourth quarter, the restaurant operator turned in a surprise 0.5% increase in Q1. Traffic increased by 0.6%, while the average transaction edged 0.1% lower. The company credited the improvement to the return of its limited-time Chicken al Pastor offering and the introduction of its new Cilantro-Lime Sauce. It added that it has seen a nice step up in April, helped by the Easter shift and strong momentum with its Cilantro-Lime Sauce.
Overall, Chipotle's revenue rose by 7.4% to $3.09 billion in the quarter, while its adjusted earnings per share (EPS) slid 17% to $0.24. That was generally in line with analysts' expectations for EPS of $0.24 of sales of $3.07 billion, according to LSEG.
Restaurant-level operating margin fell by 250 basis points to 23.7%. This is one of the most important metrics in the restaurant industry, as it measures how profitable individual restaurants are. The company is feeling pressure from increased labor costs, high beef and freight costs, and increased marketing spending.
Chipotle continues to add new locations, opening 49 company-owned restaurants in the quarter. It plans to add between 350 and 370 new restaurants in 2026, with between 10 and 15 of them in international markets with partners. It ended the quarter with 4,090 restaurants.
Despite the solid start to the year, Chipotle kept its forecast for same-store sales to be flat for the year, given the current uncertainties with the economy. It is looking for Q2 same-store sales growth of around 1%, helped by the launch of its honey chicken.
Image source: The Motley Fool.
Is the stock a buy?
Chipotle is showing some signs of life, although the company continues to take a conservative view when it comes to guidance. And while same-store sales did edge up, its restaurant-level margin contraction is something to watch. Often restaurants need to see a certain level of same-store sales growth to maintain their margins, and the company is still not at that point.
With the stock trading at a forward price-to-earnings (P/E) multiple of more than 29 times 2026 analyst estimates, it's too pricey in my view, given its recent overall lackluster operational performance.
