What Happened?
Shares of mexican fast-food chain Chipotle (NYSE: CMG) fell 3% in the afternoon session after it continued to pull back as it reported disappointing third-quarter results. The fast-casual chain’s same-store sales growth of 0.3% missed expectations, prompting the guidance reduction. Management attributed the weaker performance to a notable pullback in spending from its core younger customers, particularly those between 25 and 35. The company stated this group faced challenges including unemployment, the resumption of student loan repayments, and slower wage growth. This led them to eat at home more often rather than turning to competitors. The report also showed that profit margins edged down compared to the previous year. Following the news, which sparked the stock's steepest single-day drop in over 13 years, several analysts lowered their price targets on the shares.
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What Is The Market Telling Us
Chipotle’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 1 day ago when the stock dropped 16.5% on the news that 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.
Chipotle is down 47.2% since the beginning of the year, and at $31.60 per share, it is trading 52.2% 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 $1,329.
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