What Happened?
Shares of mexican fast-food chain Chipotle (NYSE: CMG) fell 16.5% in the morning session after the company reported third-quarter results that were in line with expectations but cut its full-year sales forecast, citing "persistent macroeconomic pressures."
The fast-casual chain’s third-quarter revenue of $3.00 billion came in slightly below Wall Street estimates, while its adjusted earnings per share of $0.29 met expectations. Same-store sales, a key metric for restaurants, were roughly flat compared to the prior year, a significant slowdown from the 6% growth in the same quarter last year. The main concern for investors was the company's revised outlook for the full year. Chipotle now expects same-store sales to see "declines in the low-single digit range," a downgrade from its previous forecast of flat performance. This lowered guidance overshadowed the otherwise in-line results, signaling concerns about future growth.
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What Is The Market Telling Us
Chipotle’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. Moves this big are rare for Chipotle and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 27 days ago when the stock gained 3.1% on the news that an analyst firm highlighted a new menu item expected to drive growth. Analysts at Stephens reiterated an 'Equal Weight' rating on the stock, noting a new, limited-time menu offering. The firm expected the new Red Chimichurri sauce to accelerate growth by attracting more customers. This positive view was supported by the company's own growth plans. Chipotle's CEO, Scott Boatwright, said the company would open between 315 and 345 new restaurants in North America. Boatwright added that the company offered "extraordinary value" while navigating a challenging economic backdrop.
Chipotle is down 45% since the beginning of the year, and at $32.92 per share, it is trading 50.2% below its 52-week high of $66.16 from December 2024. Investors who bought $1,000 worth of Chipotle’s shares 5 years ago would now be looking at an investment worth $1,370.
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