P&L

America’s burrito addiction will not be stopped by higher Chipotle prices

July 21, 2014
July 21, 2014
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The numbers: Pretty fantastic. Sales jumped 24.6% to $1.05 billion, compared to the second quarter of 2013. Sales at stores open at least 12 months—an important gauge of retail operations—surged 17.3%. Profit rose 25.5% to $110.3 million. The company raised its full-year sales guidance. Shares climbed nearly 10% in after hours trading.

The takeaway: Customers are eating price increases. Chipotle raised its prices across the board for the first time in years beginning last quarter, citing increased food costs. As forecast by early reports, customers are still flocking to the chain despite the increases. CFO Jack Hartung noted, however, in the company’s earnings call that some customers have opted for chicken instead of more expensive steak. Steak prices are up 9%, compared to an overall average Chipotle price increase of around 6%.

What’s interesting: In response to beef prices and supply shortages, Chipotle has been forced to serve conventionally raised beef in some stores. Its new solution? Australia. The company is now sourcing some beef from abroad when there isn’t enough that meets its standards in the US. CEO Steve Ells said in the company’s earnings call that the company is still committed to American ranchers, but prefers buy some grass-fed beef from Australia rather to filling the supply gap entirely with conventionally farmed US beef.

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