Chipotle Mexican Grill(NYSE: CMG) For a long time, it has been one of the most popular fast restaurant chains, but this year the company has struggled to bring the same type of customer traffic to its restaurants.
After not looking Same store sales The decline since 2020 was early in the Covid-19 pandemic, when people remained home and businesses closed. The company reported a decline in the second quarter of comparable store sales when it announced its second quarter results on July 23rd.
As of July 24th, stock prices have fallen 24% in 2025, so let’s see if this dip is a purchase opportunity and whether investors should run for the hill.
After seeing sales at comparable restaurants declined 0.4% in the first quarter, the decline continued, with Chipotle falling 4% in the second quarter. The transaction sunks 4.9%, but its average check size increased by 0.9%.
The company called May particularly weak, but rebounds began to occur in June. It praised the launch of the “Summer of Extra” rewards program for limited time Adobo Ranch Dip Offering and improvements. July has been choppy, but he said there is a continuing trend in positive comps and transactions. He also called for a strong performance of the Chipotle Honey Chicken Limited Time Offering, saying that he explained one in four orders.
Despite recent rebounds, the company has lowered its prospects for the same store all year round. Currently, comparable store sales are expected to remain flat compared to previous outlook for single-digit low growth. However, the company believes it can generate medium-sized restaurant sales in the long run. Management doesn’t think it’s a failure. Recent struggles are the result of a shift in consumer sentiment.
Overall, Chipotle increased its revenue by 3% in the quarter to $3.06 billion, but earnings per share (EPS) fell 3% to $0.33. Analysts were looking for an adjusted EPS of $0.33 against $31.1 billion in revenue. lseg.
The restaurant-level operating margin was soaked at 27.4% with 150 basis points. This is an important indicator as it measures the profitability of each restaurant. The company said its supply chain and restaurant initiatives offset a decline due to an increase in portion sizes that are too small, and is primarily due to higher wage costs and deleting sales. Last year, numerous viral videos called out several places to skip portion sizes. Approximately 30% of restaurants stated they need to be retrained with the correct portion size.
Chipotle’s goal is to return restaurant-level margins to the 29% to 30% range in the future, and to exceed average unit volume (average annual sales for individual restaurants) of $4 million.
Image Source: Getty Images
There is no doubt that chipotle is experiencing difficult stretches. The big question is whether this is self-harm, or is it primarily due to a more difficult consumer environment, or is it due to a combination of the two?
My guess is that it’s a little of both. Given all the customs speaking styles and some higher prices, there is good evidence that consumers are a little more cautious. However, I didn’t want to eat there as I’ve been to several Chipotle restaurants that were overflowing with garbage containers and had dirty tables this year. This is just an anecdote, but if it’s more widely used, it could turn off some customers. However, this problem may be easy to fix.
Meanwhile, the company still has a long growth runway. It is only just beginning to expand internationally, and continues to believe that it will be possible to increase the number of US locations at an annual rate of 8% to 10%. Therefore, Chipotle has certainly become a massive operation, but it is still growing a lot.
Stocks are currently trading from an valuation standpoint Revenue from Forward Price (P/E) A multiple of about 38 based on analyst estimates for 2025, and a multiple of 32 based on a 2026 estimates. It’s not in bargain bins, but it’s cheaper than places that have been traded for the past few years.
I think there’s room for improvement at this point, but I don’t think the long-term Chipotle story has changed. I really love its international and continuous expansion opportunities, and its core menu and limited time offerings continue to resonate with our customers. Consumers are still responding to that marketing, and in a more normal environment, I think we can return to solid sales growth for the same store. So I think investors with a long-term outlook can continue to accumulate stocks with confidence at the current level.
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Jeffrey Sayler There is no position in any of the stocks mentioned. Motley Fools have been hired and recommended to Chipotle Mexico grill. Motley Fool recommends the following options: To Motley’s fool Disclosure Policy.
