Chipotle's Sales Just Dropped for the First Time Since 2020. What Should Investors Do Now?

2 months ago 12

Jon Quast, The Motley Fool

Tue, Apr 29, 2025, 3:23 AM 5 min read

Whether it's for a burrito, guacamole, oregon thing else, diners person consistently gone retired to devour astatine Chipotle Mexican Grill (NYSE: CMG) much and much implicit the past 10 years. Of course, determination was an objection to this inclination astatine the outset of the COVID-19 pandemic -- comparable income were down astir 10% successful the 2nd 4th of 2020. But that was understandable. After all, radical were being told to enactment location to dilatory the dispersed of the microorganism astatine the time.

Chipotle's comparable income person accrued twelvemonth implicit twelvemonth successful each 4th since the 2nd 4th of 2020. That is, they had accrued until the archetypal 4th of 2025, which is the astir caller quarter. In Q1, comparable income fell by little than 1%, which is small. But they did autumn nonetheless.

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Investors request to recognize wherefore income are dropping for Chipotle successful 2025. Only erstwhile they cognize what's happening tin they fig retired what to bash astir it.

On 1 hand, the caller driblet successful income per edifice determination isn't unsocial to Chipotle. For example, Domino's Pizza reported fiscal results for the archetypal 4th of 2025 connected April 28, showing a akin driblet successful comparable sales. In short, consumers are progressively stretched bladed and they're cutting backmost connected eating out.

On the different hand, Chipotle mightiness person a occupation of its ain to woody with arsenic well. In Q1, transactions astatine the company's restaurants dropped by much than 2% twelvemonth implicit year. For perspective, they roseate by much than 5% successful 2024. In different words, Q1 income fell little than transactions due to the fact that the institution is making up the quality by charging higher prices.

Higher paper prices successful a sputtering system could explicate wherefore Chipotle's transactions are rapidly trending the incorrect way. And it's a inclination that's expected to continue, astatine slightest for a while.

Chipotle's absorption says that the 2nd 4th had a tepid commencement from a transaction standpoint, but it hopes trends volition amended precocious successful the 4th earlier turning affirmative successful the backmost fractional of the year.

Assuming that uncomfortably precocious prices are contributing to its income struggles, Chipotle is successful a challenging spot for the adjacent term. If paper prices inactive rise, it could deter radical from eating retired astatine Chipotle. Outright lowering prices seldom happens successful the edifice world. But promotional enactment is simply a communal mode to stimulate traffic. And if Chipotle chooses this approach, it could wounded the company's nett margins instead.