Chipotle downgraded its expectations for the year—again—after a disappointing third quarter, saying consumers troubled by the economy are dining out less often.
The fast-casual chain on Wednesday reported same-store sales up 0.3%, or roughly flat, with traffic down 0.8%, marking a third consecutive quarter of declines. That was offset by a 1.1% increase in average check.
And though sales increased 7.5% to cross the $3 billion threshold, restaurant margins decreased 1% to 24.5%. For the year, Chipotle is now expecting same-store sales to decrease in the low-single digit range.
That’s a worsening of expectations since the year began with projections of a mid-single-digit same-store sales increase at the end of the first quarter. By the end of the second quarter, that outlook dampened, with projections that same-store sales would be flat for the year.
Chipotle’s stock took a dive after hours, plunging nearly 16% to $33.40 per share.
CEO Scott Boatwright said the third-quarter results fell far short of expectations, saying consumer sentiment declined sharply, with a broad pullback from all income cohorts.
But the biggest loss in frequency was seen among guests making less than $100,000 a year, which represents about 40% of Chipotle’s customers. Those guests, particularly 25- to 35-year olds, are dining out less often because of concerns about inflation, unemployment, the burden of student loan repayment and slower wage growth, Boatwright said.
And then there’s the increased promotional environment, that has guests focused on value, he added.
Boatwright fears that Chipotle’s value proposition is being tarnished by the brand’s more-expensive fast-casual peers.
“The fast casual sector is just out of favor and has been deemed unaffordable,” said Boatwright. “And we are lumped into that.”
Still, Boatwright argues Chipotle is priced 20% to 30% below fast-casual peers with more of a $15 price point, like Sweetgreen or Cava, for example. Consumers just don’t seem to be getting that message.
Chipotle has been working to change that value perception, and that work will continue, Boatwright said. The chain has brought in a new advertising agency that will bring a new strategy for 2026.
Next year, Chipotle also plans to change its strategy for managing price increases, which the chain used to do in one swoop nationally, said CFO Adam Rymer. Going forward, Chipotle plans to take a slower and more measured approach on pricing, getting a read on resistance and reaction before rolling out nationally.
This year, Chipotle has increased promotions and added new menu news, like Carne Asada and the Adobe Ranch and Red Chimichurri sauces. Boatwright said those efforts have paid off, and Chipotle is planning more menu innovation, including both new proteins and new sauces and sides.
Chipotle data indicates 90% of Gen Z guests said they’d visit just for a new sauce, for example.
The chain also plans to continue working on restaurant execution, as the rollout of a new kitchen modernization equipment package continues. Boatwright said he sees inconsistencies in things like order accuracy and cleanliness when he visits restaurants. To address that, the company will be re-emphasising standards with retraining, and tying bonus incentives to digital order accuracy and the guest experience.
Next year, Chipotle is accelerating its growth plans, expecting to open between 350 to 370 new restaurants, including growth internationally in Europe, the Middle East, South Korea and, soon, Mexico.
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