Chipotle Mexican Grill Shares Go Down As Company Dips Below Revenue Target

Chipotle Mexican Grill Shares Go Down As Company Dips Below Revenue Target
Chipotle Mike Mozart / Flickr CC BY 2.0
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Things aren’t looking good for Chipotle as the fastfood restaurant that takes pride in using healthy and fresh local ingredients has slightly failed to meet revenue expectations, causing stock prices to drop by 17% since February, Barron’s reports.


Moreover, Dakota Financial News also found that analysts at Vetr had decided to downgrade Chipotle Mexican Grill from a “strong buy” rating to a “buy” rating. Meanwhile, analysts at Zacks had decided to downgrade the said shares from a “buy” rating to a “hold” rating.

In total, there are reportedly 19 ratings firms that follow the Chipotle Mexican Grill stock. Among them, six research analysts have decided to give the said stock a “hold” rating. Meanwhile, there are 12 analysts who gave Chipotle Mexican Grill’s stock a “buy” rating.

In addition, analysts at Credit Suisse have also decided to lower the target price of the shares from $770 to $725. At the same time, analysts from Wedbush gave the fastfood restaurant’s shares a “neutral” rating as it adjusted its price target from $665 to $620.

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For the first quarter of 2015, Chipotle Mexican Grill reported a revenue $1.09 billion. That represents a 20.4% increase from the restaurant’s revenue during the first quarter of 2014. Moreover, the said increase is largely due to a 10.4% increase in sales of comparable restaurants – that is, Chipotle outlets that have already been in operation for a minimum of 13 full calendar months. Moreover, during the first quarter, Chipotle opened 49 new branches. This brought their total number of locations to 1,831.

Meanwhile, Chipotle Mexican Grill could not be more pleased with its sales, especially when they are looking at the numbers per restaurant. As founder, chairman and co-CEO of Chipotle Steve Ells has said, “We are very proud of our start to 2015, as our average sales volumes reached a record $2.5 million per restaurant. We attribute this success to our unique food culture and people culture, which are the driving forces to create a new fast food model.”

Moreover, the said increase in sales can also be attributed to the increase in price menu as well as a slight increase in restaurant foot traffic.

The new fastfood model is said to be what is at the heart of Chipotle’s philosophy. They believe in sourcing “the very best ingredients we can find” and prepare all the food they serve by hand. In addition, they also believe in buying meat – such as pork – that have been Responsibly Raised®, simply because Ells believes they “taste better and will continue to resonate with our customers.” Moreover, he said, “Consumer trends are changing, which we believe is a great result of people becoming more discerning about where their food comes from, how it was raised, and how their meal was prepared.”

Meanwhile, this serious commitment to pasture-raised animals posed quite a challenge for Chipotle during the first quarter of 2015 as they ended up suspending one of their primary pork suppliers while they strive to find other suppliers that would meet high standards.

As far as these standards go, Chipotle Mexican Grill was so proud that it had become the very first national restaurant company to say no to GMO. As Ells has said, “There is a lot of debate about genetically modified foods. Though many countries have already restricted or banned the use of GMO crops, it’s clear that a lot of research is still needed before we can truly understand all of the implications of widespread GMO cultivation and consumption. While that debate continues, we decided to move to non-GMO ingredients.”

Nonetheless, Chipotle also admitted that they still have one food item not free from additives – their tortillas. It is said to be the only ingredient that uses a number of preservatives as well as dough conditioners. Over time, Chipotle plans to serve tortillas that are additive-free as it works on developing new tortilla recipes.

Meanwhile, Chipotle’s management believes that they will be opening 190 to 205 new restaurants for the remainder of the year. At the same time, they are also targeting a “low-to-mid single digit” sales increase for its comparable restaurants.

As Chipotle co-CEO explains, “Our teams of top performers continue to create extraordinary customer experiences in our restaurants, which generates customer loyalty and attracts new customers. We are very pleased with our field leadership’s ability to empower restaurant teams and develop new leaders. This competitive advantage is at the heart of our people culture, and we believe will continue to deliver strong business results throughout 2015.”