Chipotle profits get a boost from increased traffic
(Reuters) - Chipotle Mexican Grill Inc (CMG.N) on Thursday said better-than-expected sales at established restaurants boosted quarterly profits and signaled it may raise prices in the middle of 2014 to offset higher food costs, sending shares up 7.7 percent.
The fast-growing burrito chain has been reluctant to increase menu prices despite higher costs for ingredients such as California avocados and salsa. Executives said they first want to secure ample supplies of natural meats and switch to cooking oil and tortillas that do not contain genetically modified organisms (GMOs).
Chipotle's sales at restaurants open at least 13 months, a closely watched gauge of industry performance, were up 6.2 percent for the latest quarter, more than the average analyst estimate of 4.7 percent compiled by Consensus Metrix.
Executives from the Denver-based chain said visits to its restaurants increased when its animated film and arcade-style game about sustainable food production went viral on Facebook, Twitter and YouTube.
Chipotle was the first major U.S. restaurant chain to disclose which of its ingredients contain GMOs - which are becoming increasingly controversial as more diners seek information about what's in the food they eat.
Third-quarter net income at Chipotle increased 15 percent from the year earlier to $83.4 million, or $2.66 per share. That fell short of analysts' average estimate of $2.78 per share, according to Thomson Reuters I/B/E/S, as higher food, labor and rent costs squeezed margins.
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 gained $33.72 to $472.79 in after-market trading.
(Reporting by Lisa Baertlein in Los Angeles; Editing by Steve Orlofsky)