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By Lisa Baertlein
July 21 Burrito chain Chipotle Mexican Grill Inc
last quarter achieved what many of its rivals could only
dream of: It raised prices, yet attracted more diners during a
period of sluggish economic growth.
The Denver-based chain on Monday reported a nearly 26
percent jump in second-quarter profit after sales at established
restaurants surged 17.3 percent.
The better-than-expected results prompted Chipotle to boost
its full-year same-restaurant sales forecast, and its shares
rose almost 10 percent in after-hours trading to $648.80.
Chipotle is known for serving antibiotic-free meats and
organic produce, which appeal to trend-setting teen and young
adult diners. Investors love the chain because its restaurants
crank out more and more sales without increasing costs.
Rival Panera Bread Co was on a similar trajectory
until last year, when "operational friction" caused it to
stumble on speed.
Executives at Chipotle said speed of service is at record
levels, due to its focus on nurturing top-performing staff and
its use of technology that helps analyze and improve
"We are the fastest we have ever been at lunch time and at
dinner time, but the averages throughout the entire day are
speeding up as well," Chipotle co-Chief Executive Monty Moran
said on a conference call with analysts.
And, he said, service can get faster still.
Investment Technology Group restaurant analyst Steve West
"I wouldn't bet against Chipotle until they prove
otherwise," said West, who noted that bears for years have
wagered that Chipotle would hit its limit on service times.
Based on last quarter's gains, Chipotle raised its forecast
for 2014 same-restaurant sales growth to a mid-teen percentage
range, from a single digit estimate previously.
The company is an outlier in the U.S. restaurant industry,
whose same-store sales rose just 0.3 percent in the second
quarter, according to Black Box Intelligence, which tracks
It is difficult for restaurants to raise prices when
same-store sales growth is anemic, and McDonald's executives
likely will face pricing questions after the company reports
quarterly results on Tuesday morning.
Chipotle boosted prices to help offset higher costs for
ingredients like beef, avocados and dairy. While more people ate
at the chain, some diners did switch from pricey beef to
lower-cost chicken, executives said.
Chipotle also has begun buying grass-fed, antibiotic-free
beef from Australia to help ease tight supplies, co-Chief
Executive Steve Ells said.
Chipotle's stock, which was trading at around $400 a year
ago, closed at $589.93 on Monday, valuing the company at more
than $18 billion. That was twice as much Burger King Worldwide
, but still significantly less than former owner
McDonald's Corp, with its market value of more than $96
(Reporting by Lisa Baertlein in Los Angeles; Editing by Bernard
Orr and Richard Chang)