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Analysts hope for Chipotle price increases

NEW YORK (AP) -- As Chipotle remains popular with U.S. consumers, analysts hope that the burrito chain will rise prices again this year to protect its profits as ingredient costs rise.

THE SPARK: Chipotle Mexican Grill Inc.'s net income rose 7 percent to $61.4 million in the fourth quarter. The company opened new locations and drew more customers to established restaurants.

THE BIG PICTURE: Like other restaurant chains, Chipotle's costs are rising — in its case, for beef, salsa ingredients and dairy. It has increased prices, mostly in 2011, to help offset that, but it's still not as profitable as it used to be.

However, there are others who worry that price increases will drive away customers in a weak economy, especially with rivals like Taco Bell offering similar fare.

The Denver company's traffic was strong in the fourth quarter, but it predicted slower growth in revenue in established restaurants for this year. Chipotle forecast the metric in a range of unchanged to up to a low single digit percentage increase, down from growth of 7.1 percent in 2012.

The forecast doesn't include any effect from possible price increases this year.

THE ANALYSIS: Chipotle is likely to increase prices, said William Blair analyst Sharon Zackfia, as its food costs rose more than expected.

Chipotle has no specific plans for another menu price increase, and the earliest one would come would likely be midyear, said CFO John Hartung on a call with analysts.

Zackfia said a new catering service could also help growth pick up in the second half of the year.

SHARE ACTION: Up $16.71, or 5.5 percent, to $321.72 in afternoon trading. Shares are still down more than 13 percent over the past 12 months.