Mexican fast-food chain Chipotle (NYSE:CMG) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 6.4% year on year to $2.88 billion. Its non-GAAP profit of $0.29 per share was 5.3% above analysts’ consensus estimates.
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Revenue: $2.88 billion vs analyst estimates of $2.94 billion (6.4% year-on-year growth, 2.1% miss)
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Adjusted EPS: $0.29 vs analyst estimates of $0.28 (5.3% beat)
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Adjusted EBITDA: $578.3 million vs analyst estimates of $571.1 million (20.1% margin, 1.3% beat)
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Operating Margin: 16.7%, in line with the same quarter last year
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Free Cash Flow Margin: 14.3%, down from 16.2% in the same quarter last year
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Locations: 3,781 at quarter end, up from 3,479 in the same quarter last year
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Same-Store Sales were flat year on year (7% in the same quarter last year)
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Market Capitalization: $69.77 billion
Chipotle’s first quarter results reflected the impact of softer consumer demand and macroeconomic uncertainty, as discussed by management on the earnings call. CEO Scott Boatwright attributed the flat same-store sales and pressured transaction trends to a combination of weather, consumer caution, and challenging year-on-year comparisons. He emphasized that “the elevated level of uncertainty felt by consumers” led many to reduce restaurant visits, with value and convenience cited as major factors influencing behavior.
Looking ahead, management outlined several initiatives intended to return the company to positive transaction growth in the second half of the year, including expanded marketing, new menu items, and investments in kitchen automation. Boatwright expressed confidence that these efforts, along with ongoing restaurant expansion, would help Chipotle “return to positive transaction growth in the second half of the year,” while CFO Adam Rymer highlighted the company’s “strong plan for the remainder of the year” despite persistent macro headwinds.
Chipotle’s management detailed several factors shaping the quarter’s performance and provided insight into operational and strategic adjustments underway.
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Consumer Spending Slowdown: Management cited broad-based consumer caution, referencing internal studies that showed guests reducing frequency due to economic uncertainty and a preference for eating at home. This trend was evident across all income cohorts and geographies.
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Operational Initiatives: Chipotle continued to focus on in-restaurant execution, with an emphasis on enhancing hospitality and throughput. New training and operational adjustments, such as improved prep processes and deployment of an “expo” position, were rolled out to improve the guest experience.
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Kitchen Innovation Rollout: The company accelerated the rollout of kitchen equipment including produce slicers, dual-sided planchas, and high-capacity fryers. Management expects these tools will improve prep speed, consistency, and labor efficiency, with full implementation targeted over the next several years.
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Menu Development and Marketing: The limited-time Chipotle Honey Chicken offering was highlighted as a driver of incremental transactions, outperforming previous launches. Management also outlined an increased marketing spend through the summer, with targeted digital and rewards-based initiatives to boost brand visibility and guest engagement.
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Expansion Strategy: Chipotle opened 57 new restaurants in the quarter, including 48 Chipotlanes, and remains on track for its goal of 315-345 new openings this year. International growth is progressing, with new partnerships in the Middle East and Mexico, and expansion plans for Canada and Western Europe.
Management’s outlook for the rest of the year centers on operational improvements, menu innovation, and continued store expansion to offset macroeconomic pressures and drive a return to positive transaction trends.
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Operational Efficiency Initiatives: Chipotle is investing in back-of-house automation and revised prep processes aimed at improving throughput, labor allocation, and guest satisfaction, which management believes will support margin stability and transaction growth in the latter half of the year.
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Marketing and Menu Innovation: Enhanced marketing campaigns, new digital strategies, and a more frequent cadence of limited-time menu offerings are intended to re-engage customers, with management suggesting these could add “top spin” to traffic trends during seasonal lulls.
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Expansion and New Markets: The ongoing pace of new restaurant openings, both in North America and select international markets, is expected to drive access and convenience for customers, with management maintaining confidence in its long-term target of 7,000 locations despite current consumer headwinds.
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Andrew Charles (TD Cowen): Asked how Chipotle plans to maintain positive traffic amid increased fast-casual competition. Management pointed to its value proposition and operational speed as key differentiators.
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Sara Senatore (Bank of America): Inquired whether the observed sales softness was due to macroeconomic headwinds or difficult year-on-year comparisons. Management attributed most of the slowdown to broad consumer caution, supported by internal survey data.
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David Tarantino (Baird): Probed whether internal metrics suggested brand-specific challenges or broader market trends. Management cited strong brand health indicators and low turnover, reinforcing their view that macro factors were the primary drag.
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Sharon Zackfia (William Blair): Asked about sales trends by income cohort and channel. Management indicated the slowdown was broad-based, not concentrated in any specific group or geography.
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Gregory Francfort (Guggenheim): Queried the impact of tariffs and kitchen equipment investments on costs and margins. Management noted most kitchen equipment is U.S.-made, with some cost exposure from imported components, but said the full margin impact is still being evaluated.
In upcoming quarters, the StockStory team will be watching (1) the effectiveness of new kitchen automation and operational initiatives in improving throughput and guest satisfaction, (2) the impact of enhanced summer marketing and limited-time menu items on traffic trends, and (3) the pace and economics of new restaurant openings, both domestically and in international markets. The ability to offset macro pressures with these efforts will be critical in tracking Chipotle’s progress toward its transaction and growth targets.
Chipotle currently trades at a forward P/E ratio of 39.5×. Should you double down or take your chips? Find out in our free research report.
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