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If you've noticed that your burrito cups have become a bit more expensive for lunch in recent years, there's a reason for this:
Chipotle Mexican Grill
(CMG), which had not raised prices in years before April 2017, rolled across the chain, which ended in January.
That was good for business. The company reported third-quarter results after the close on Thursday and recorded a 4.4% increase in the same restaurants, which provided the best year – and the best result for new CEO Brian Niccol. Stocks rose 1% on Friday morning to $ 428.
Higher menu prices, management said, led to the largest part of the increase; Together with restaurant openings, this contributed to a year-on-year increase in sales of 8.6%.
They have also contributed to profit margins. Rising prices and cheaper avocados meant that food, beverage and packaging costs represented a lower percentage of sales than meat, paper and packaging costs; The operating margins of the restaurant also widened as the company reduced marketing and advertising costs.
Well, according to Chipotle, it may not be that long before prices rise again – mostly because it seems to offset rising labor costs. "We are open to smaller, more regular increases," said CFO Jack Hartung Barron in a Friday morning interview, saying that labor costs have been rising for years and that Chipotle wants to attract highly qualified employees in the face of this growth.
"We will pay more than fair value for talent," said Hartung.
The Company now points investors to low- to mid-single-digit sales growth in the same period last year; In the first nine months, they rose by 3.3%.
Under Niccol and his management team, Chipotle has been trying to revive the burrito chain from a time when his hard-earned position in fast-casual dining was scared food safety incidents in his restaurants.
But management's focus on structured innovation has helped the stock, along with solid restaurant performance, grow by about 50% this year.
Chipotle continues to open restaurants. Investors were told on Thursday that they should expect this year's countdown to end at the low end of the 130 to 150 new restaurants he has previously released. 140 to 155 are targeted next year. (At the end of Q3, there were a total of about 2,450 restaurants, and the company believes it could eventually reach about double.)
Management did not divide sales for the same store for 2019. On Thursday, he essentially said that too many of his initiatives are too new to make this projection more confident.
But Hartung has said what the company can change the most next year: digital growth, including pickup, delivery and a loyalty program; "Throughput", which leads to an increase in the overall productivity of the production line; and branding.
Better news delivery, said Hartung, could help Chipotle with another number: comparable restaurant transactions, down 1.1% in the third quarter and 2.1% in the first nine months of 2018. (So, he said, could better stock.) Operations and digital services that make ordering easier.)
"In the last two years, [diners] we have not had enough reasons to return more often," he told Barron. "It used to be organic – we would open a restaurant and people would come."
As news spread about health issues in the company's restaurants, Chipotle remained more the defender than the insult. The new marketing campaign, along with new menu items and shop opening hours, could arouse interest.
"We forgot to remind people that Chipotle really is a special dining experience," said Hartung. "We did not remind our customers that going to our restaurants is like a farmer's market … we need to stand more on our feet and give people reasons to come more often."