Chipotle Mexican Grill Inc (NYSE:CMG) shares plunged about 17% on Thursday morning after the fast casual restaurant chain posted disappointing results for Q3 and downwardly revised its full year guidance.
During the September quarter, same-store sales grew 0.3% from the year-ago quarter, below the 1% expected by Wall Street analysts.
Revenue was $3 billion, up 7.5% year-over-year, but slightly missing the consensus of $3.02 billion.
Earnings per share were $0.29, ahead of the $0.28 expected, but Chipotle’s operating margin decreased to 15.9% from 16.9% as it faced increased costs, notably pressure on beef prices due to US tariffs.
Also weighing on Chipotle stock was the company’s revision to its full-year outlook, marking the third straight quarter it has revised its guidance.
The company now expects comparable restaurant sales to decline in the low single digits for the full year, a significant downgrade from its prior forecast of about flat same-store sales growth.
"While we continue to see persistent macroeconomic pressures, our extraordinary value proposition and brand strength remain strong," Chipotle CEO Scott Boatwright said in a statement.
On the company’s earnings call, Boatwright elaborated that the company is seeing demand challenges among its core 25 to 35-year age group, citing unemployment, increased due loan repayments and slower real wage growth.
During Q3, Chipotle opened 84 new company-owned stores.
Labor costs increased to 25.2% of total revenue, up from 24.9% in the year-ago period, driven by lower sales volumes and wage inflation but partially offset by menu price increases.