Bad News, Chipotle Devotees: Prices Are Going Up
How much are you willing to pay for that Chipotle burrito bowl?
Though Chipotle has proven concept with a resounding affirmative “yes” to the question “are consumers willing to pay a little more for a better fast food product?” the question might soon become “how much?” Reuters reports that Chipotle Mexican Grill Inc. might finally have to cave to its initial reluctance to increase menu prices.
See, due to the quality of their organic meats, California avocados and fresh salsa, food costs for Chipotle have always been high. The thing is, they’ve more-or-less been willing to eat that cost until now. They’ve projected better-than-expected sales, and will therefore likely increase prices in the middle of 2014 to offset those costs and boost their shares up 7.7 percent.
Third-quarter net income for Chipotle increased 15 percent from the year prior to $83.4 million, or $2.66 a share. That was short of analysts’ average estimate of $2.78 per share, according to Reuters analysis. Higher food, labor and rent costs tightened the profit margins.
More stuffy details, per Reuters:
Chipotle narrowed its full-year forecast for same-restaurant sales to mid-single-digit percentage growth. The Denver-based chain previously said it expected low- to mid-single-digit percentage same-restaurant sales growth for 2013.
For 2014, it forecast low single-digit percentage growth, excluding menu price increases.
Analysts say Chipotle needs mid-single-digit percentage growth of same-restaurant sales to protect profits.
Shares of Chipotle also gained $33.72 to $472.79 in after-market trading.
What does this mean for you, the fanatical Chipotle devotee? We’re not sure as of now since the company isn’t even really sold on raising prices just yet. If they do you will definitely notice, but possibly only on certain products. Another bit of good news is that Chipotle is going to switch to a different cooking oil and different tortillas, specifically ones that are GMO-free.