Chipotle (CMG) won’t be raising prices of chicken burritos or guac and chips as it tries to navigate through fragile consumer sentiments and a trade war.
The burrito chain missed expectations on revenue and same-store sales in its first quarter report on Wednesday after market close. It posted its first decline in same-store sales since 2020, while transactions decreased 2.3%, the largest drop since 2022.
In an interview with Yahoo Finance, CEO Scott Boatwright said it does not plan to raise prices “anytime in the near future” given the state of the consumer.
He explained the company needs to see which components of the tariffs “will be transitory, which will be permanent, and we’ll take a pricing action when it’s right and appropriate.” The company has to evaluate the full impact before deciding if they’re a permanent hit to the business.
However, if need be, Chipotle “absolutely” has the power to adjust prices.
“We have pricing power at Chipotle that I believe is unparalleled, and we view that pricing power as an asset … we can choose to spend that asset when we want to. Given the strength of our balance sheet and the strength of our economic model, that gives us the opportunity to be patient,” Boatwright said.
As tariffs reignited concerns for inflation, investors have been dumping shares of fast-casual chains for fast food giants, a reversal of recent trends.
Year to date, fast-casual stocks like Chipotle, Sweetgreen (SG), and CAVA (CAVA) are down 19%, 42%, and 23%, respectively. Shares of McDonald’s (MCD) and Yum! Brands (YUM) are up nearly 10% and 9%.
Chipotle shares dropped 2% in after-hours trading.
Investors are weighing potential risks like exposure to avocado costs, ongoing wage inflation pressure (like the FAST ACT), intense competition, and “economic sensitivity,” per William Blair analyst Sharon Zackfia.
Inflation-weary diners have already been turning to lower-cost options. According to KPMG’s March consumer pulse survey, 26% of respondents visited fast food and quick service restaurants more often over the past year, whereas 38% were choosing casual dining less often.
When asked about Chipotle’s value proposition, Boatwright said the average cost of a chicken burrito or bowl is still under $10 nationally.
“We are a 10% to 20% discount to QSR today, and oftentimes a 10% to 20% discount to our fast casual peer group,” he said, adding that consumers are still splurging for sides like queso or chips.
CFO Adam Rymer said on its earnings call that “dinner has been holding up better than lunch recently.”
