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Financing

Chipotle’s turnaround slows to a crawl in Q3

Chipotle Mexican Grill eked out a same-store sales gain for the third quarter of 1%, a sharp drop-off from the 8.1% gain of the prior quarter despite easy comparisons with the year-ago period.

The chain noted that sales were affected in part by the hurricanes that struck Texas and Florida this summer, and indicated that $18.2 million of revenues were earmarked to cover expected liabilities from a data security breach. Chipotle has set aside a total of $30 million to date because of the hacking.

The hurricanes cost Chipotle $6 million in lost sales, according to CFO Jack Hartung, and four restaurants remain closed. He noted that two openings were delayed, and that expenses related to the storm amounted to about $3.3 million.

Hartung added that Tropical Storm Lidia also took a toll on the chain's financial performance. Because the fit of bad weather delayed the maturation of avocados growing in Mexico, Chipotle's cost per case doubled in short order, Hartung said. He noted that costs did not decline until October. Food costs for the third quarter increased to 35% of sales, the chain revealed.

Overall, revenues increased 8% during the quarter to $1.13 billion, and net income more than doubled, to $19.6 million, compared with $7.8 million a year ago.

Management noted that a deceleration during Q3 still leaves the chain with a positive traffic trend and an increased average check for the first nine months of the year. It noted that the chain is offering fewer promotional bargains in its efforts to win back patrons who abandoned the brand after a series of food-poisoning incidents in late 2015.

The sharp effects of that crisis were still evident in the third quarter of last year, with Chipotle posting a 21.9% free fall in comps on a 15.2% plummet in traffic.

Chipotle did not reveal a traffic figure for Q3 of 2017.

“Despite several unusual impacts during the quarter, including the impact of hurricanes, we maintained our focus and saw some encouraging signs,” CEO Steve Ells said of his brand’s financial performance from June through September.

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