By Praveen Paramasivam and Hilary Russ
(Reuters) -Chipotle Mexican Grill Inc forecast second-quarter same-store sales above analysts’ estimates on Tuesday, betting demand for its burritos and rice bowls will remain buoyant despite a few rounds of price increases.
The burrito chain forecast comparable restaurant sales growth of 10% to 12% for the current quarter, compared with estimates of 8.8% growth, according to IBES data from Refinitiv.
The company’s shares rose nearly 5% in extended trading.
Chipotle, like rivals McDonald’s Corp and Starbucks Corp, has raised prices of its in-store and delivery menus in a bid to counter higher prices for everything from employee wages to beef, avocados and paper.
Food, beverage and packaging costs in the first quarter were 31% of total revenue, an increase of 100 basis points from a year earlier.
In late March, Chipotle hiked the price of a carnitas bowl at one New York City location by 5% to $11.55, a Reuters track of prices showed, though raising menu prices is “really the last thing we want to do,” CEO Brian Niccol said in an interview.
Chipotle’s core customers – which analysts say are among the most affluent and youngest – have not pushed back against more expensive meals, Niccol said.
Despite increased prices for customers, higher food costs also squeezed restaurant margins, which dropped 160 basis points to 20.7%. Margins should rebound to 25% in the second quarter if inflation stabilizes, he said.
Automating kitchen tasks could eventually help offset higher labor costs. The company is preparing to test Chippy, a robotic arm that fries tortilla chips, in one California location.
Chipotle is also exploring robots to remove tasks employees say they don’t like – chopping onions and jalapenos and coring avocados – although employees enjoy mashing the guacamole, Niccol said.
Comparable sales rose 9% in the first quarter ended March 31, while analysts polled by Refinitiv expected 7.9% growth.
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)
