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Chipotle's All About Good Taste

By Alyce Lomax - Apr 22, 2013 at 7:30PM

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The burrito slinger is a class act and a classic stock holding.

Chipotle Mexican Grill (CMG 1.70%) has been going through an awkward phase: Its stock price has dropped along with investors' appetites. However, Chipotle's recent quarter shows that it isn't done growing or excelling just yet.

In these choppy economic times, Chipotle's numbers are "muy bien." Net income increased 22.2% to $76.6 million, or $2.45 per share. Revenue increased 13.4% to $726.8 million. Although comparable-restaurant sales only inched up by 1%, these are still figures that most fast-food players would envy.

Going forward, Chipotle has a few twists up its sleeve. It's announced a new margarita offering in 900 restaurants that eschews a mix and uses a few simple ingredients like organic agave nectar and Patron Silver tequila in a handmade drink. Whether investors know it or not, alcohol isn't a new offering -- some Chipotle restaurants already offer beer and a less natural version of a margarita.

Chipotle has long been one of the few quick-serve restaurants that offer vegetarian-friendly customization, and it's upping the ante by adding tofu to the menu. My colleague Rick Munarriz recently covered the expansion of its "Sofritas" tofu-stuffed burritos experiment to more restaurants in Northern California .

There are now 48 more Chipotle stores on the landscape, bringing the count to 1,458. Although many fret that the Chipotle concept may not have much farther to run, compare that figure to the 5,200 Taco Bell restaurants Yum! Brands (YUM 1.77%) has placed all over the U.S. consumer landscape .

Compared to Taco Bell, the U.S. could use a little more of the class act that is Chipotle, even if Taco Bell has been rushing to try to copy Chipotle's cachet with a fancier menu. Still, Taco Bell's hit Doritos Locos Tacos doesn't exactly scream wholesome, as Chipotle's Food with Integrity mission does.

Many Chipotle detractors have called Taco Bell a reasonable alternative and formidable rival, but I have long objected. They serve very different demographics, and Taco Bell's is more likely to graduate to Chipotle than the other way around.

Plus, even if Chipotle aims to retain an air of specialness and keep its growth below that of Taco Bell, it can expand its operational expertise to other concepts. Take its slow rollout of ShopHouse East Asian Kitchen restaurants.

Last but not least, let's emphasize once again that the latest quarter was by no means a given. Many consumers are finding themselves with less discretionary income. Even McDonald's has stumbled from its former might, and its long-popular Dollar Menu is no longer helping to shore up the fast-food giant's well-being.

I've included Chipotle in the real-money Prosocial Portfolio I'm managing for Fool.com. Granted, it's been in the red ever since. However, I plan to hold through thick and thin unless the company starts to show signs of seriously losing its way. As far as I can tell, Chipotle's on target just as it's always been.

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Stocks Mentioned

Chipotle Mexican Grill, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,294.11 (1.70%) $21.62
Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
YUM
$111.92 (1.77%) $1.95

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