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Chipotle is reviving its Friday the 13th promotion, offering a buy-one-get-one deal for guests with tattoos during a one-hour window. The event includes a partnership with artist Wiz Khalifa for limited-edition packaging. While these flash promotions help maintain brand buzz and can drive a brief surge in visits, they rarely move the needle for long-term results. For a company currently facing a slowdown in customer traffic, the real test remains whether it can grow regular daily transactions rather than one-off promotional events.
Source: PRNewsWire
Guggenheim lowered its price target from $36 to $32 following the company's recent earnings report. The firm kept its neutral rating, which suggests it does not see a clear reason to buy or sell the stock at its current price. This new target is slightly below where the stock trades today and sits at the bottom of our own estimated fair value range. While several analysts still have higher targets, with the average across all firms at $41, this move reflects a more cautious view on the chain's ability to grow profits while labor costs rise.
Source: Guggenheim
The chain plans to raise menu prices by roughly 3 percent in the final quarter of the year. This move is a response to the rising costs of ingredients like beef, more expensive shipping, and higher wages for its workers.
While raising prices can sometimes drive customers away, the company is betting that its diners will pay a bit more for its food. If customers keep coming back despite the hike, it will help the company maintain its profit margins even as its own bills get more expensive.
Source: New York Post
After Chipotle's October results, we updated our fair value. We changed our rating from Buy to Watch. We lowered our projections for sales growth at stores open more than a year and cut our expected profit margins to 23.3%. We have added corporate overhead and the cost of employee stock bonuses to the items we track.
Chipotle earned $0.27 per share last quarter, missing the $0.29 analysts expected. While total revenue grew nearly 10 percent to $3.3 billion, the company's operating margin, the percentage of sales left after paying for things like food and labor, dropped to 13.7 percent from 15.9 percent a year ago.
The business is still attracting more customers, with transaction growth rising for the third straight quarter. However, the cost to serve those customers is rising faster than prices. The company opened 84 new locations, mostly featuring drive-thru Chipotlanes, as it continues its push to reach 7,000 stores in North America.
See the full quarter, and how our tracked metrics did
Source: 8-K filing
Management has a long record of setting a low bar and clearing it by a penny, but a recent miss suggests that rising costs are now moving faster than they can forecast.
| Expectation | |
|---|---|
| EPS | $0.26 |
| Revenue | $3.27B |