Slow consumer spending resulted in a tough first quarter for Chipotle, setting the stage for a difficult earnings season ahead for restaurants.
Chipotle’s same-store sales fell 0.4% for the March 31-ended first quarter, which was the result of a 2.3% decline in transactions that was offset by a 1.9% increase in average check. It was the first same-store sales decline for the fast-casual brand since the pandemic shutdown of 2020.
CEO Scott Boatwright said bad weather earlier this year was also a factor, as was the shift in the Easter holiday.
But it was clear the sales decline was not a result of bad performance by Chipotle restaurants, he argued—at least according to visitation surveys done within the past few weeks.
It was simply the fact that consumers are spending less.
“It was all around this idea of saving money; economic uncertainty. They’re eating at home more frequently than eating out,” he said.
CFO Adam Rymer said the chain began to see underlying transactions softening a bit in February and it has continued through April, though that sales trend was offset somewhat when the brand introduced the Chipotle Honey Chicken limited-time offer in March, which Boatwright indicated is doing as well as the popular Chicken Al Pastor did last year.
The slower spending was broad based, and not from any one cohort, like lower-income consumers, or urban versus suburban, he said.
The second quarter is also likely to bring difficult comparisons. Last year in the second quarter, same-store sales were up more than 11%, reaching the high teens in April last year.
Fundamentally, however, Boatwright said Chipotle is doing everything right and he expressed confidence the chain would return to positive same-store sales for the second half of the year.
“While we can’t predict how long these consumer headwinds will last, what I do know is that the Chipotle brand has never been stronger, that we have an extraordinary value proposition, [and] that it is more important than ever to focus on being guest obsessed to earn every transaction,” he said.
Still, the company downgraded its outlook somewhat.
On Wednesday the company projected low-single digit sales growth for the year. At the end of the fourth quarter, the company had projected same-store sales for fiscal 2025 would be in the low- to mid-single digit range.
Boatwright said Chipotle is continuing its focus on throughput, rolling out training tools to emphasize details from the “thank you” from a cashier to ensuring dining rooms and drink stations are clean at peak hours.
Investments in back-of-the-house equipment rolling out in phases will further free up team members to focus on throughput, he said. New produce slicers should be in all restaurants by the end of the second quarter, for example, and the kitchen upgrades include a dual-sided plancha, dual-vat fryers and a three-pan rice cooker.
And Chipotle is moving two of its automation innovations back into restaurants for further testing, after they both spent time at the Cultivate Center for some tweaks.
Both the avocado-peeling robot named Autocado, and the Augmented Digital Makeline will be put back into restaurants for further testing this summer, Boatwright said.
The chain is also rethinking catering, which accounts for about 1.5% of sales currently. Boatwright contends catering is a growth opportunity and the chain has developed a plan for scaling that operation, which will be tested in the fall.
Food, beverage and packaging costs were 29.2% during the quarter, an increase from 28.8% a year ago, in part because of higher avocado costs, along with dairy and chicken—though Rymer noted that avocado costs weren’t as high as had been expected because of the postponement of the 25% tariff on Mexico and Canada and the exemptions there. Tariffs are expected to have about a 20-basis point impact during the second quarter.
Net income was $386.6 million on revenues of $2.9 billion, up 6.4%.
Chipotle opened 57 company-owned restaurants during the quarter for a total of 3,781 company-owned units, as well as two internationally licensed units in the Middle East, bringing the total in that region to five.
Earlier this week, Chipotle announced plans to open restaurants in Mexico for the first time, in partnership with the international franchise operator Alsea.
The Newport Beach, California-based chain is on track to operate about 7,000 restaurants across North America. Chipotle grew its U.S. unit count by 8.1% in 2024, according to Technomic’s Top 500 restaurant data, and sales increased 14.7% to $11.2 billion.
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