Chipotle Fell Short On Third Quarter Profit (NYSE:CMG)

Chipotle Mexican Grill Inc. reported that its third-quarter profit missed estimates in a statement. Earnings amounted to $4.59 a share in the period, lower than analysts’ estimates of $4.62 on average, according to data compiled by Bloomberg. The company’s shares fell as much as 7.7 percent after the announcement, falling as low as $651.50 in after-market trading. The stock had been up 3.1 percent this year.

Higher labor costs and marketing expenses reduced profit at the restaurant chain last quarter. Operating margins shrunk roughly 50 basis points, falling to 28.3 percent. Improving avocado and dairy prices, as well as a menu price increase, were not enough to save the quarter.

Investors appear to be concerned about rising costs and slowing growth at the restaurant chain. The company expects sales for the fourth quarter to come in at about the level of the previous three months. Chipotle believes sales will end the year with a low- to mid-single-digit percentage increase. The company recorded a 17 percent gain in 2014. For 2016, the company is projecting a low-single-digit rise.

Sales growth has fallen from last year, though still coming in ahead of estimates. Sales rose 12 percent in the quarter to reach $1.22 billion, which was in line with projections. Same-store sales rose 2.6 percent in the third quarter, higher than analysts’ projections of a 2.5 percent increase. Net income climbed 11 percent to $144.9 million in the quarter.

Chipotle expects to get a sales boost from the return of carnitas to more than 1,900 restaurants across the U.S. The pork shortage flared up in January, but the company recently said pork was already back at 90 percent of its restaurants and should be back in all restaurants by the end of November. Chipotle expects to open as many as 225 restaurants this year and is planning to add 220 to 235 new locations next year.

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