Chipotle Mexican Grill Inc. (CMG), the burrito chain whose share price has more than doubled in the past year, reported second-quarter profit that trailed analysts’ estimates as food costs gained.
Net income rose to $50.7 million, or $1.59 a share, from $46.5 million, or $1.46, a year earlier, the Denver-based company said in a statement today. The average of 21 analysts’ estimates compiled by Bloomberg was for profit of $1.67.
Co-Chief Executive Officers Steve Ells and Montgomery Moran have raised menu prices to help offset higher ingredient costs. The Department of Agriculture expects U.S. meat prices to climb as much as 7 percent in 2011. Chipotle said its restaurants’ operating margin narrowed to 25.8 percent in the quarter from 26.9 percent a year earlier.
Chipotle fell $17.29, or 5.2 percent, to $316.42 at 4:05 p.m. in trading after the close of the New York Stock Exchange. The shares had risen 57 percent this year through the close of regular trading today.
The company says it will be raising menu prices at 80% of its stores by the end of the year. Commodities prices, especially for meat and cheese, are really doing a number on the big restaurant chains this year. Growth is coming from markets outside the US at this point. In the US, numbers are down as more and more people are cutting back on eating out.
Despite being a Wall Street darling, Chipotle badly missed numbers for the quarter and will be raising prices. How much? Well, let's just say I don't see too many Americans chowing down on $7 burritos in the future.
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