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Chipotle's 'Burrito boom' continues, but prices are going up

April 17, 2014: 9:40 AM ET

Chipotle sees strong demand from burrito fans.

The burrito business is booming, but rising commodities prices are taking a bigger bite.

Chipotle Mexican Grill (CMG) is proving to be one of the best at bringing Tex-Mex to the masses.

The fast food restaurant chain earned $83.1 million, or $2.64 per share, in the first quarter.

That fell short of analysts' expectations, but the restaurant touted its strong sales. Even the winter weather didn't hurt demand for burritos and tacos.

Chipotle shares rose in early trading, but the stock came under pressure in the afternoon and ended the day down nearly 6%.

Revenue increased nearly 25% to $904 million in the quarter. And same-store sales, a key measure of growth, increased more than 13%.

Chipotle has been on an big expansion push, opening new locations around the country with people often lining up for the restaurant's debut in their towns. And it has no plans to slow its roll. The company expects to open up to 195 new stores in 2014.

But rising prices for staple ingredients have been giving Chipotle some indigestion. Food costs ate up nearly 35% of its revenue in the quarter.

Holy Guacamole: Chipotle says don't panic

Beef prices have risen to all-time highs as cattle farmers recover from two years of drought. Chipotle said its paying 25% more for steak. It expects cheese prices to increase 10% and the supply of avocados is down due to dry weather in California.

With all the food price inflation, Chipotle plans to increase menu prices for the first time in three years, said chief financial officer Jack Hartung.

"We're at a point where we need to pass along these rapidly rising food prices," Hartung said in a conference call with analysts. Menu prices will go up "somewhere in the mid- single digits" on a percentage basis, beginning this quarter, he said.

Still, he said the company has built up a fair amount of pricing power. After three years, Chipotle feels it has "permission" to raise prices and may consider additional hikes next year.

  • Is McDonald's doomed?

    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

    Are the meals no longer as happy for McDonald's customers as they used to be? The fast food giant definitely seems worried.

    McDonald's (MCD) reported lackluster quarterly results last week. And company executives used the words MORE

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    The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.

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    - Oct 15, 2013 12:43 PM ET
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    Noodles & Co. must be carbo-loading. Shares of the casual restaurant chain have been on quite the run since making their public debut last week.

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  • Hedge funds bet against Chipotle

    Hedge fund managers might like Chipotle's burritos, but some are betting against the company's stock.

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    - May 9, 2013 12:16 AM ET
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    Investing 101: If a stock is priced for perfection, bad news is going to cause a rush for the exits. That definitely was happening with fast food giant Yum! Brands (YUM) on Friday.

    Even though the company reaffirmed its outlook for 2013, investors were spooked by an alarming 4% decline in same-store sales in China. Yum has focused heavily on China, particularly through its KFC franchise.

    Shares fell nearly 10%. An overreaction? MORE

    - Nov 30, 2012 12:32 PM ET
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    Chipotle's stock sank more than 10% after-hours Thursday. On Friday, shares fell more than 15% before gaining back some ground.

    I fortuitously  bumped into Einhorn MORE

    - Oct 19, 2012 10:23 AM ET
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    - Jul 26, 2012 12:59 PM ET
  • Chipotle: A spicy stock downgraded to mild

    Shares of Chipotle Mexican Grill plunged more than 20% Friday after the company reported weaker-than-expected sales growth, even as profits rose in the second quarter.

    Chipotle (CMG) stock fell $92.28, or 23%, to $311.98 a share. Shares of McDonald's (MCD), Wendys (WEN) and Taco Bell-owner Yum brands (YUM) were down between 1% and 2%.

    The sell-off came after Chipotle said late Thursday that same-store sales, a key measure of demand, grew only MORE

    - Jul 20, 2012 12:55 PM ET
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#StupidStock Move of the Day! $AMZN up 3%. Rebounding with rest of tech. But with earnings Thursday, it seems risky to get too bullish, no?
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