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Investing.com - Shares in Chipotle Mexican Grill (NYSE:CMG) tumbled by more than 10% on Thursday after the burrito chain slashed its full-year sales target as an uncertain economic backdrop threatens to weigh on demand.
Sweeping U.S. tariffs have raised concerns over a possible acceleration in inflation and a slowdown in growth, leading some customers to rethink splurging on pricier services like dining out.
Speaking to analysts, Chipotle executives said they anticipate about a 40-basis point impact on margins from the levies in the current quarter, followed by "a little bit more than that" in the fourth quarter.
CEO Scott Boatwright said the company is reviewing how it can "better communicate our value proposition" to cost-conscious diners and "center around the core equities of the brand."
"I don’t think we’re getting credit with the consumer today," Boatwright said.
With these trends in mind, Chipotle said it now projects that annual comparable restaurant sales will be around flat year-on-year, versus its previous target for low single-digit growth.
Revenue for the quarter rose by 3% versus a year ago to $3.1 billion, compared to analysts’ $3.11 billion target.
Comparable restaurant sales dropped 4.0%, weighed by a 4.9% decline in customer transactions and only partially offset by a slight 0.9% increase in average check size. Analysts had anticipated a comparable sales drop of 2.91%.
Operating income margin slipped to 18.2% from 19.7% a year earlier, while restaurant-level margin dipped to 27.4% from 28.9%. Adjusted earnings per share came in at $0.33.
Digital orders remained a bright spot, making up 35.5% of total food and beverage revenue. Meanwhile, Chipotle repurchased $435.9 million in stock during the quarter at an average price of $50.16.
"In the near term, Chipotle shares seem to be a call on consumer confidence," analysts at TD Securities said in a note, adding that the group’s comparable "sales miss and lowered 2025 guidance is reflective of macro headwinds."
(Luke Juricic contributed reporting.)