The consumption level of the burrito eatery still remains high, according to the analyst report.
Chipotle said it’s raising its menu prices by 2%, which is a relatively unusual acknowledgment of how persistent inflation continues to affect the company’s operations.
“For the first time in more than a year, we have raised our prices by approximately 2% nationally to help cover inflation,” Laurie Schalow, Chipotle’s chief corporate affairs officer said in a statement.
The comment came, in part, as a reaction to an analyst report by the Truist Securities financial group, which noted the 2% increase at 20% of Chipotle outlets.
Chipotle is in a transition period after losing its CEO, Brian Niccol, who joined Starbucks in August this year. Chipotle’s stock fell when the news of Niccol’s exit was released but has since risen by 23% and is approximately 42% higher for the year.
Although Chipotle has been recording high earnings in the latest quarters, it failed to meet its revenue estimates in the latest report. While it said traffic had remained steady — which the Truist analysts are also observing in the data on card spending — overall demand appeared to be slowing.
Chipotle also said that it experienced increased food expense, which it attributed to its recent actions to address online complaints about portion control.
Eating out has been observed to be costly in most cases in the recent past. According to Bureau of Labor Statistics, the price of food that is consumed outside the home has increased by over 28% since spring of 2020 when Covid-19 began to spread in the United States.
Most restaurants have experienced high turnover and increasing cost of ingredients during that time but have recorded healthy earnings because consumers are willing, in selected instances, to pay higher prices if they are getting value for their money.
In the case of Chipotle, Truist said, it is raising prices “from a point of strength,” meaning traffic continues to be steady, based on the firm’s card spending data. On the other hand, the company’s total operating expenses are still relatively well controlled.
Food prices are known to fluctuate greatly. The Agriculture Department reported that the wholesale poultry prices were 4.5% below the level of October 2023, and the wholesale poultry prices are expected to decline by 0.6% on net this year.
However, beef and veal prices were 1.9% higher in October than in October 2023 and are expected to rise at a quicker rate than most other meats in 2024 because of the limited supply and sustained demand.