Atlanta, Oct. 22 - Chipotle Mexican Grill Inc posted its first profit decline since going public in 2006 Wednesday, as it battled higher ingredient costs and a slowing U.S. economy.
The restaurant operator said sales were still positive but growth has slowed. It added that it did not expect to meet a longer-term outlook for per-share earnings growth of 25 percent while consumers and the economy were under pressure.
The quarterly results from Denver-based Chipotle, a former Wall Street darling, comes amid worries financially stressed consumers will skip even more restaurant visits as they weather a housing slump, credit crisis and rising unemployment.
The company warned of the expected profit fall last month.
"These tough economic times make it harder for customers to afford to eat out," Monty Moran, president, said during a conference call. "We know that some of our customers are forced to visit us a little less frequently than they were a year ago."
The company said it planned to retool its marketing to play up its quality ingredients to entice new customers and added that its board approved spending up to $100 million to buy back its Class B common stock.
Chipotle, known for serving premium-priced naturally raised meat, said third-quarter net income fell to $19.5 million, or 59 cents per share, from $20.6 million, or 62 cents per share, a year earlier.
Analysts, on average, expected earnings of 59 cents per share, according to Reuters Estimates.
Revenue rose 18.9 percent to $340.5 million, better than the $339.5 million analysts expected, aided by the opening of 20 restaurants.
Restaurant-level operating margins decreased to 21.4 percent from 23 percent the year earlier, primarily due to higher food costs.
Sales at established restaurants rose 3.1 percent, helped by price increases.
Chipotle said it plans to raise prices in the fourth quarter, but added the increases would not fully offset rising food costs.
The company expects 2008 comparable-store sales increases in the low- to mid-single digit range and plans to add 130 to 140 new restaurants this year. In 2009, up to 145 new restaurants are planned.
Chipotle shares traded at $41 in extended trading after the results were posted Wednesday, about flat with their $41.08 close on the New York Stock Exchange.