Chipotle Mexican Grill warned on Tuesday that proposed tariffs on Mexico could increase its raw material costs by 60 basis points, affecting its annual sales growth. The burrito maker expects low to mid-single digit comparable sales growth this year, below analysts’ expectations of 5.2%. Shares fell 4% in extended trade.
The company’s reliance on Mexican supplies, particularly avocados, makes it vulnerable to higher costs if tariffs take effect. Avocados account for half of Chipotle’s supply, and the company has already seen increased costs of commodities like avocado and beef as it tries to revamp its menu.
New CEO Scott Boatwright said he would continue efforts on kitchen automation technology to reduce labor costs. However, the 2% price hike in December is likely to remain in place for the rest of the year. The company’s operating margin decreased to 14.6% in the reported quarter, compared to 16.9% in the previous quarter.
Analysts predict that if inflation continues, restaurants may have little choice but to raise prices again. However, some experts believe Chipotle remains a good value for consumers despite past price hikes.
Source: https://finance.yahoo.com/news/chipotle-mexican-grill-reports-smaller-211431435.html