Chipotle Mexican Grill Inc (CMG.N) on Thursday said the sluggish U.S. economy slowed growth in sales at established restaurants during the second quarter, sending its shares down more than 6 percent.
The Denver-based burrito chain is one of the restaurant industry's best-performing names - frequently posting results that many operators would envy - and the unexpected deceleration took investors by surprise.
The company's sales at restaurants open at least 13 months, were up a healthy 8 percent, but fell short of the 10.1 percent gain analysts had expected, according to Consensus Metrix.
Chief Executive Jack Hartung said those sales cooled in late April and continued on that trend through May and June. He pegged the retreat to "a general slowing of the economy and reduced consumer spending".
Despite the disappointing sales, executives said they believed they still had the power to raise menu prices.
ITG Research analyst Steve West said he had expected Chipotle's same-store sales to land where it did, based on data that showed weaker spending growth by Chipotle diners.
Chipotle directly competes with Jack in the Box Inc's (JACK.O) Qdoba burrito chain and other upstarts.
Earlier this month Yum Brands Inc's (YUM.N) Taco Bell chain, which boasts about 50 percent market share in the Mexican fast-food category, debuted its "Cantina Bell" menu across the United States. That menu is similar to the one found at Chipotle, but prices are lower.
Shares of Chipotle, which was spun out of McDonald's Corp (MCD.N) in 2006, fell 6.4 percent to $378 in extended trading.
Chipotle's second-quarter profit grew more than 61 percent to $81.7 million, or $2.56 per diluted share.
Analysts, on average, expected a profit of $2.30 per share, according to Thomson Reuters I/B/E/S.
Revenue for the quarter was $690.9 million, up almost 21 percent.
Executives forecast mid-single-digit percentage growth in sales at established restaurants for the full year and guided to an effective tax rate of about 39 percent.
Chipotle fired hundreds of workers in 2010 and 2011 after audits by the U.S. Department of Homeland Security's Immigration and Customs Enforcement (ICE) arm turned up undocumented workers on payrolls in Minnesota, Virginia and Washington, D.C.
The U.S. Securities and Exchange Commission, Homeland Security and the federal prosecutor's office for Washington, D.C., are investigating the company's compliance with immigration laws.
(Reporting by Lisa Baertlein in Los Angeles; Editing by Bernard Orr)