By Praveen Paramasivam and Hilary Russ
(Reuters) – Chipotle Mexican Grill Inc on Tuesday forecast second-quarter same-store sales above analysts’ estimates, betting demand for its burritos and rice bowls will remain buoyant despite some price hikes.
The burrito chain expects comparable restaurant sales growth of 10% to 12% for the current quarter, against growth estimates of 8.8%, according to IBES data from Refinitiv.
Shares of the company rose nearly 5% in extended trading.
Chipotle, like rivals McDonald’s Corp and Starbucks Corp, has raised prices for its in-store and delivery menus in a bid to counter rising prices for everything from employee wages to beef, avocados and paper.
Food, beverage and packaging costs in the first quarter accounted for 31% of total revenue, an increase of 100 basis points over the prior year.
In late March, Chipotle raised the price of a bowl of carnitas at a New York restaurant by 5% to $11.55, according to a Reuters price trail, although the menu price increase is “really the last thing we want to do,” CEO Brian Niccol said in an interview.
Chipotle’s main customers — who analysts say are among the wealthiest and youngest — haven’t pushed back on more expensive meals, Niccol said.
Despite higher prices for customers, higher food prices also squeezed restaurant margins, which fell 160 basis points to 20.7%. Margins should rebound to 25% in the second quarter if inflation stabilizes, he said.
Automating kitchen tasks could potentially help offset higher labor costs. The company is preparing to test Chippy, a robotic arm that fry tortillas, at a California site.
Chipotle is also exploring robots to remove tasks employees say they don’t like — chopping onions and jalapenos and scooping out avocados — though employees like to mash guacamole, Niccol said.
Comparable sales rose 9% in the first quarter ended March 31, while analysts polled by Refinitiv had expected growth of 7.9%.
On an adjusted basis, Chipotle earned $5.70 per share in the first quarter, beating estimates of $5.64.
(Reporting by Praveen Paramasivam in Bengaluru and Hilary Russ in New York; Editing by Sriraj Kalluvila, Bernard Orr and Richard Pullin)
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