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Chipotle CFO explains latest price increase: Our competitors are still more expensive

·Anchor, Editor-at-Large
·2 min read

Chipotle thinks it's giving customers a major bang for their buck, even as the fast-casual food chain is poised to take another menu price increase of 4% in August.

"When we look at Chipotle compared to others in the fast-casual sector, we are still underpriced," Chipotle CFO Jack Hartung said on Yahoo Finance Live (video above). "Every competitor we look at, whether it's the Mexican category or in the salads that have a food ethos, they are much more expensive. Even after this price increase, you can get a chicken burrito or chicken bowl for around $9."

So far, consumers haven't shown much resistance to higher prices as the burrito king passes along red-hot inflation for labor and commodities.

SAN FRANCISCO, CALIFORNIA - APRIL 26: Pedestrians walk by a Chipotle restaurant on April 26, 2022 in San Francisco, California. Chipotle Mexican Grill will report its first quarter earnings today after the closing bell. (Photo by Justin Sullivan/Getty Images)
Pedestrians walk by a Chipotle restaurant on April 26, 2022, in San Francisco, California. (Photo by Justin Sullivan/Getty Images)

After reporting earnings, Chipotle shares surged more than 14% as of 1:05 p.m. on Wednesday as traders bet that the August price increase would help accelerate earnings growth. The company's ticker page was one of the top five most-visited on Yahoo Finance.

Here is how Chipotle performed compared to Wall Street estimates for the second quarter:

  • Net Sales: $2.21 billion versus $2.25 billion expected

  • Adjusted EPS: $9.30 versus $9.10 expected

  • U.S. same-store sales: 10.1% versus 10% to 12% increase expected

The restaurant chain also said same-store sales in the third quarter so far are tracking up by a mid- to high-single-digit percentage, alleviating concerns about a sharp slowdown at the hands of mounting recession fears.

"Core drivers of value creation (particularly high-return on invested capital unit growth) continue to track near best in the industry (with visibility into this persisting well beyond 2022), and the company’s cash flow generation/solid balance sheet are a buffer to macro risks," Citi analyst Jon Tower wrote in a note to clients. "Particularly with signs inflation may not abate as quickly as spot, we’d encourage investors to add to/build positions in market share takers like Chipotle set to accelerate gains while inflation continues to pressure competitors’ cash flows."

Tower reiterated a buy rating on Chipotle shares.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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