Traffic jump boosts Chipotle restaurant sales, stock soars

(Reuters) - Chipotle Mexican Grill Inc CMG.N said on Thursday an increase in customer visits contributed to bigger-than-expected growth in quarterly sales at established restaurants, and its shares rose nearly 13 percent in extended trading.

The sign for Chipotle Mexican Grill's restaurant is seen in Westminster, Colorado October 17, 2013. REUTERS/Rick Wilking

News that the fast-growing burrito chain is considering menu price increases in the third quarter contributed to the stock gain because such a move could further boost the chain’s sales results.

The fast-growing burrito chain said sales at restaurants open at least 13 months, a closely watched gauge of industry performance, rose 9.3 percent during the fourth quarter, better than the 6.7 percent expected by analysts, according to Consensus Metrix. Most of the restaurant sales growth came from increased traffic, Chipotle said.

Chipotle’s results landed after some major restaurant chains reported cooling or falling sales for the latest quarter. Traffic to brick-and-mortar stores also posted a steep drop during the holiday season, as shoppers shopped online from the comfort of their couches.

U.S. same-restaurant sales at Starbucks Corp SBUX.O were up 5 percent, mainly because of traffic gains. Still, that result softened from the prior period.

Elsewhere, sales at McDonald's Corp's MCD.N U.S. restaurants open at least 13 months fell 1.4 percent in the fourth quarter, when overall traffic to its global restaurants declined.

Chipotle’s fourth-quarter net income increased nearly 30 percent to $79.6 million, or $2.53 per share, matching analysts’ average estimate, according to Thomson Reuters I/B/E/S.

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Food costs were 33.9 percent of revenue, an increase of 40 basis points, due mostly to higher avocado costs, but also to costs for tomato and corn salsa. Those increases were partially offset by lower dairy and steak costs.

A price increase in the ballpark of 3 percent to 5 percent is likely in the third quarter to help offset higher food costs, although no decision has been made, Chief Financial Officer Jack Hartung said.

Chipotle, known for using antibiotic-free meats and organic produce when possible, was the first major U.S. restaurant chain to announce plans to remove food ingredients containing genetically modified organisms, or GMOs, from its supply chain.

“As of now, all of our cooking oils used in North America are made from ingredients that are not genetically modified, and there are only a few key steps left before all of our food is made without genetically modified ingredients,” said Steve Ells, Chipotle’s founder, chairman and co-CEO.

The company plans to finish removing GMO ingredients from its corn and flour tortillas by the end of this year, Ells said.

Chipotle raised its 2014 forecast to call for low to mid single digit same-restaurant sales increases, excluding any menu price increases. Its prior call was for an increase in the low single digits.

Executives also plan to open 180 to 195 new Chipotle restaurants in 2014, more than ever before.

Chipotle sales rose 12.6 percent to $556.28 in extended trading after closing at $493.96.

Reporting by Lisa Baertlein in Los Angeles; Editing by Steve Orlofsky and Andre Grenon