Executives placed blame for the negative turn of Chipotle’s same-store sales in the first quarter squarely on the consumer.
In other words, Chipotle said, It's not us. It’s them.
But does the 0.4% decline in same-store sales for the March 31-ended quarter—which included a 2.3% decline in traffic—indicate any problem with Chipotle?
Outside data indicates consumers are slowing spending. But Chipotle’s perception of value could also be a factor in the brand’s sales trend downturn.
In explaining earnings on Wednesday, Chipotle CEO Scott Boatwright said the chain asked guests in a recent visitation survey why they weren’t spending as much.
“It was all around this idea of saving money, the economic uncertainty,” he said. “They’re eating at home more frequently than they’re eating out.”
Boatwright reiterated that Chipotle’s value perception remains a competitive advantage.
The average cost of a chicken bowl or burrito is still under $10, which is about 20% to 30% below comparable fast-casual competitors, and can be as much as 50% below those peers in some markets, he said.
“What you get for this price is hand-crafted, high-quality culinary in abundance at a speed in which you can’t find anywhere else,” said Boatwright. “This is resonating with our guests, and we can see it in our brand tracker, which continues to gain momentum. In fact, our latest survey shows Chipotle ranks top three in a record 15 perceptual drivers and leads in key areas, including good amount of food for your money, and quality of ingredients.”
Outside data, however, indicates that consumers may be seeing things a bit differently.
Consumer survey data from market research firm Technomic, which is a sister brand to Restaurant Business, has Chipotle ranking well below fast-casual peers like Sweetgreen, Cava and Raising Cane’s on aspects like affordability, portion sizes for the price paid, and value through high-quality menu items.
And on the aspect of “value through quick, high-quality service,” Chipotle ranked dead last among its peers.
“I have never seen them being a top performer in the way [Boatwright] is talking about,” said Robert Byrne, Technomic’s senior director, consumer research. “I don’t know that they spend enough time looking in a mirror and seeing what they really rate.”
Technomic tracks 108 limited-service brands, including quick service and fast casual, looking at consumer surveys that go back years. Byrne said Chipotle consistently scores in the bottom 100 or more for a lot of the attributes that measure value specifically.
It’s true that a chicken bowl or burrito can be under $10 in most markets, Byrne said. But most people don’t just choose a bowl or burrito. Often there’s a drink and additional sides, like guacamole, which can increase the price significantly.
“If they put in double chicken, or extra steak, that can make it a $20 burrito,” said Byrne.
What ends up happening is that one of the most important measures of loyalty—the intent to return—is also low for Chipotle, relative to the brand’s peers.
“Their top box score, people who strongly agree that they intend to return, is 106 out of 108,” Byrne said.
Chipotle has been battling perceptions about value for some time.
During the post-pandemic era of rising food and labor costs, Chipotle (and most restaurants) raised menu prices, and former CEO Brian Niccol repeatedly touted the brand’s pricing power.
Last spring, the chain came under attack by hordes on TikTok and other platforms who insisted Chipotle was skimping on portion sizes, even as those menu prices climbed.
And Chipotle responded. Last year, the chain launched a program to retrain team members to ensure portions would be generous, a move that continues to raise food costs. Company officials say that has fixed the portion problem.
Chipotle has also put a lid on price increases. This year, Boatwright said there are no current plans to raise menu prices, though they remain up about 2% over last year from earlier hikes.
Predicting that same-store sales will turn positive in the second half of the year, Chipotle is also planning to introduce an additional limited-time offer this summer—which could be either a side item or a dip—supported by advertising, which would create some news to juice traffic.
Typically, Chipotle has introduced limited-time offers in the spring and fall, and those promotions can be highly effective in driving traffic. This would add a third event to the marketing lineup.
Beginning in May and continuing through the summer, Chipotle plans to increase its marketing spend “to reach more guests and meet them where they are,” said Boatwright. “This will include menu innovation around the possible side or dip, increasing marketing in our digital and social channels, and leveraging our rewards platform to target specific customer cohorts and group occasions.”
That was good news for Wall Street analysts who follow the brand.
Peter Saleh, managing director of BTIG and restaurant analyst, said in a report on Thursday that he was encouraged by news of a third LTO coming at Chipotle.
Saleh, however, said he thought Chipotle’s loss in sales could be an indication of the fast-casual chain losing market share, saying guests could be trading down to quick-service chains like McDonald’s, which he said had a very strong April, as well as Taco Bell, which is “marching toward 8% comps.”
Jeffrey Bernstein of Barclays Capital argued in a report that traffic is likely to remain challenged in the second half of the year.
In addition, Bernstein expects the impact of tariffs to impact Chipotle’s planned expansion, increasing building costs. The chain plans to add 315 to 345 units this year.
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