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With the costs of everything from labor to avocados on the rise, Chipotle (CMG) isn't ruling out another price increase not too far off into the distance.
Little to no negative reaction to a recent price increase only emboldens Chipotle to see how much pricing power it truly has in the competitive restaurant industry.
"We have seen no resistance whatsoever," Chipotle CFO Jack Hartung told Yahoo Finance Live, referring to consumers' response to a 4% menu price increase taken in May. The hike was taken so Chipotle could invest in higher wages for its workers and counterbalance inflation in various ingredients."
"We have not made any decisions [on more price increases]. We know there is some inflation coming. What we don't know is how much, and we don't know how much of that is going to be permanent and how much is going to be transitory. I suspect it's going to be a combination of both," Hartung added. "We are going to be patient. We are going to watch how inflation unfolds over the next several months and the next few quarters. The thing we don't want to do is raise prices and find out inflation we are trying to cover actually is transitory."
The commentary comes after another impressive quarter for Chipotle, even as it dealt with rising levels of inflation. Here’s what the California-based company reported, compared to Wall Street’s expectations, according to a Bloomberg consensus estimate:
Revenue: $1.9B vs. $1.88 billion expected
Adj. earnings per share (EPS): $7.46 vs. $6.54 per share expected
Same-store sales: 31.2% vs. 29.8% expected
Chipotle shares exploded 11% to $1,748 in Wednesday trading, reaching a record high. The previous high for Chipotle's stock was $1,623, hit on July 14, according to Yahoo Finance Plus data.
Despite the lofty stock price and elevated expectations moving forward, Wall Street is staying upbeat on Chipotle.
"Valuation pushback is often part of the bear refrain, but we'd argue best-in-class new store returns, cash generation and visibility into ongoing comp leverage should place shares at >2x the market multiple," said Wells Fargo restaurant analyst Jon Tower.
Tower reiterated his Overweight rating on the stock (Buy equivalent) and lifted the price target to $1,800 from $1,780.
Yahoo Finance's Brooke DiPalma contributed to this story.