Your precious Chipotle burrito is about to get more expensive

April 17, 2014
April 17, 2014

The rising cost of food is eating into the bottom line at Chipotle Mexican Grill.

The Mexican restaurant chain still impressed investors Tuesday, as revenues surged 24.4% to $904.2 million during the first quarter. But profit growth wasn’t as punchy. Net income at the one-time McDonald’s unit (McDonald’s spun off Chipotle as a separate company back in 2006) rose 8.5% to $83.1 million. And you can see that the sizzling profit growth that Chipotle has seen in recent years has cooled off a bit. (Though that’s to be expected as the size of its profits rise.) The company, which emphasizes its use of high-quality sustainable ingredients, blamed rising costs for meat, cheese and avocados for declining profit growth. Food costs rose 1.50 percentage points to 35% of revenues during the quarter, the company said.

Chipotle-net-income-growth-year-on-year-change-Profit-growth_chartbuilder

And that’s precisely why the burrito behemoth is considering raising prices later this year. In January, company officials said “we believe a menu price increase is likely, sometime during the third quarter.” (Though they also stressed that the decision wasn’t final.) But with little sign that a drought in California’s agricultural region is abating any time soon, there’s not much reason to expect these food prices to decline much either. So don’t be surprised to see a more expensive Chipotle burrito in the future.

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