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(Reuters) – Chipotle Mexican Grill Inc (N:CMG) on Wednesday posted an 18.6% drop in quarterly profit, hurt by higher beef prices, delivery costs and coronavirus-related expenses.
Shares of the company, one of the best performers in the restaurant sector following a 60% rise this year, fell as much as 6% after the closing bell.
Still, the burrito chain reported a three-fold jump in online sales, as consumers ordered more freshly prepared meals and favored to-go orders instead of dining inside restaurants.
Comparable sales rose 8.3%, beating Wall Street expectations of a 7.59% rise, according to IBES data from Refinitiv.
Fast food restaurants – particularly pizza and Mexican restaurants – have seen sales increase amid the pandemic as customers craved comfort food, preferred the contactless nature of delivery, drive-thru and pick-up, and got tired of their own cooking at home.
Chipotle’s digital sales could exceed $2.5 billion in 2020, more than double the amount in 2019, Chief Executive Officer Brian Niccol told analysts during a post-earnings conference call.
Net income fell 18.6% to $80.2 million for the third quarter. On an adjusted basis, the company earned $3.76 per share, beating estimates of $3.47.
Chipotle brought back its popular carne asada option mid-September, helping comparable sales during that period grow in the mid-single digits, Chipotle said, adding that the trend continued through October.
The chain charged an extra $1 for its carne asada this year, compared with the 50-cent premium it charged when it launched in 2019 as a limited-time offering, according to Cowen analysts.
It also raised menu prices for delivery items. Even so, that was not enough to offset the higher costs of delivery itself, combined with elevated beef prices.
The average operating margin per restaurant was 19.5% for the quarter, a decrease from 20.8% from a year earlier, also hurt by fewer sales of beverages.
“Between now and next year… if delivery shifts into in-store and shifts into order-ahead and pick-up, then I’d say our margins per share are headed on the way up,” Chief Financial Officer John Hartung told analysts.
“If delivery stays the same or increases, we’ll have some challenges,” he said.
He also said that labor costs will be around 25% in the fourth quarter as the benefit of menu price increases will be slightly offset by lower seasonal sales.
