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Chipotle named a good investment in Wall Street's Transcript report
December 27, 2009
The Wall Street Transcript (TWST) has published its Food, Beverages And Tobacco Report offering a review of the sector to serious investors and industry executives. The 32-page feature contains expert industry commentary through in-depth interviews with public company CEOs, equity analysts and money managers.
Companies include Chipotle, Coca-Cola, Jones Soda, Nestle and PepsiCo.
The following is an excerpt from the report in which Scott M. Swanson, a partner and senior equity analyst at Crowell, Weedon & Co. in Los Angeles, discusses the outlook for the restaurant sector and for investors:
TWST: Chipotle actually raised prices in 2008. Do you think that was a good move? How has that played out for them?
They kind of had to. They were doing that last year in the third quarter and fourth quarter of 2008, and that's when there was really big food commodity price inflation going on. And so in a lot of ways, Chipotle was passing it along to the consumer. I think those plans and the pricing changes were put in place really almost coinciding with when everything actually started to kind of melt down a little bit in the economy. And so it was a bit of a problem, I guess, in trying to get those through. But in effect, they kind of had to. And the industry was kind of there, too, because again the food costs were affecting all the operators.
They haven't raised them this year; they don't, at this point, have a plan to raise them next year. So it was one of those things where they bump it up a little bit, kind of take the hit and then let the consumer adjust. But Chipotle also is the kind of concept that they think that they have a value-added proposition, primarily from using better ingredients, more locally sourced, organically sourced, naturally raised, all of that kind of stuff. They feel like there is a certain subset of the population that's willing to pay up a bit for the higher-quality ingredients that go into what they do. So when we look at same-store sales trends this year, traffic trends were down a little bit; same-store sales were up through the year for Chipotle, but that was largely a function of the price.
Click here to review the report.
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