Initially met with skepticism by investors and analysts alike, Chipotles across-the-board price increment in April has since proven to be a savvy business move. The Colorado-based food chains stock soared a whopping 12% this week after the companys quarterly report was released.
The news marks the latest improvement in a series of promising developments for a corporate newcomer that has already begun to challenge established food giants such as Burger King and McDonalds.
As Ben Rooney of CNN Money reports, The Denver-based burrito maker said it earned $3.50 per share in the second quarter. It was expected to have made $3.09 per share, according to estimates from FactSet. That’s hot, hot, hot on Wall Street.
The stock is now at an all-time high, trading above $660 a share (in other words, the stock now costs as much as roughly 80 burritos).
Hike in Chipotle’s prices had no ill affect
Analysts explain that the stock surge is mostly due to the restaurant chains recent hike in prices, which has done little to deter customers from continuing to line up for their preferred customized burritos and bowls.
Rooney goes on to explain that, Revenue rose 28% to $1.05 billion, surpassing analysts’ estimates, as higher prices boosted the top line. The price hikes also haven’t taken a toll on store traffic. Same-store sales, a key measure of growth, increased 17% in the second quarter. That was one of the strongest quarterly sales rates in Chipotle’s history as a public company, according to CEO Steve Ells.
While the hike in prices has proven to be a fortuitous move for the company, it wasnt a decision that was entirely motivated by a desire to increase the chains profit margin. Rather as has been the case with multiple other food chainsChipotle was reacting to a rise in basic ingredient prices, such as meat and cheese.
Meanwhile, as of now, even the most cautious estimates foresee continued growth for the remainder of the year. Despite its similarities to fast food chainsespecially in terms of price range and serving speedChipotle has continuously presented itself as the healthier alternative to customers and investors alike. So far, the business plan is paying dividends as the CEO Steve Ells plans to open another 195 restaurants by the end of the year.
In a statement, Ells emphasized the companys excitement about its future prospects: Were pleased that we continued to drive excellent results in the second quarter, including one of our strongest sales comps as a public company. These extraordinary results are made possible by our special food culture, innovative