Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of casual-dining restaurant Chipotle Mexican Grill
So what: If you can't take the heat, get out of the kitchen! Chipotle reported second-quarter profit that grew 61% from last year on a 21% increase in sales and an 8% boost in same-store sales. The big news, however, was the company's comments that customer traffic slowed significantly throughout the second quarter, which it blamed on sluggish consumer spending. Chipotle also noted that rising input costs will be a deterrent on margins and, when combined with a traffic slowdown, could lead to slower growth.
Now what: Don't say I didn't tell you so -- because I've told you so more than once! Chipotle is still growing more quickly than many of its peers, but investors had been pricing the stock for perfection. Just last month, one of my biggest beefs (pun wholeheartedly intended) with Chipotle was its overall market value versus the number of stores that were open. That value was more than triple that of McDonald's
Today's news also brings up concerns about the food sector as a whole; specifically, healthier food options. Chipotle prides itself on serving fresh and natural foods. If consumers are trading down toward cheaper options again, that could be slight cause for concern for a grocer like Whole Foods Market
Craving more input? Start by adding Chipotle Mexican Grill to your free and personalized Watchlist so you can keep up on the latest news with the company.