(Reuters) – Chipotle Mexican Grill surpassed market expectations for quarterly results on Thursday, as demand for its burritos, rice bowls and special menu promotions defied higher prices and weakness in the broader restaurant industry.
Shares rose more than 5% in extended trading, after the company also reported a 100-basis-point increase in quarterly operating margin, on the back of easing costs of commodities such as vegetables, paper and rice.
While dining traffic has weakened across the industry, Chipotle has banked on targeted promotions and menu offers to drive demand, while also boosting average spending at its restaurants through new protein add-ons.
Chipotle’s wildly popular Carne Asada protein returned to menus in September for a limited time, boosting traffic. The company has also leaned on its rewards program and attracted new members through trivia games and perks like free guacamole.
Traffic at Chipotle jumped 11.6% in July, followed by increases of about 10% and 4.7% in August and September, respectively, according to Placer.ai data.
The Mexican-inspired chain was among the very few major restaurant names that saw an increase in footfall at stores throughout the third quarter, even as brands such as McDonald’s and KFC saw traffic declines, the data showed.
“Expectations were fairly low just given everything that we’ve seen in restaurant land with the GLP-1 (weight loss drugs), but…Chipotle is executing,” said Sante Faustini III, director of product intelligence at M Science.
Faustini added that traffic so far in the current quarter was outpacing what was seen in the third quarter.
Comparable sales at the California-based chain climbed 5% in the third quarter, beating a 4.46% increase expected by analysts on average, according to LSEG data.
Excluding items, Chipotle earned $11.36 per share in the quarter, topping estimates of $10.55.
Chipotle forecast fourth-quarter comparable sales growth in the mid- to high-single-digit range, compared with estimates of a 5.38% rise.
The company also expects to open about 285 to 315 new restaurants in 2024.
(Reporting by Deborah Sophia in Bengaluru; Editing by Krishna Chandra Eluri and Devika Syamnath)
