News

Consumer economic uncertainty poses threat to Chipotle growth

CEO Scott Boatright looks to upgrade back-of-house technology and increase catering sales.

Photo: Chipotle

April 24, 2025

Although Chipotle CEO Scott Boatright said the chain's latest LTO, Chipotle Honey Chicken, was helping to drive incremental transactions, an "elevated level of uncertainty felt by consumers" began affecting sales in February.

"We could see this in our visitation study, where saving money because of concerns around the economy was the overwhelming reason consumers were reducing the frequency of restaurant visits," he told investors Wednesday during a Q1 earnings call." This drove a slowdown in our underlying transaction trends."

Q1 revenue was $2.88 billion vs. the $2.95 billion expected.

The decline has continued into April.

"While we can't predict how long these consumer headwinds will last, what I do know is that the Chipotle brand has never been stronger, that we have an extraordinary value proposition that is more important than ever to focus on being guest-obsessed to earn every transaction," Boatright said.

Tariff uncertainty

Cost of sales in the quarter were 29.2%, an increase of about 40 basis points from last year.

"The benefit of our menu price increase was more than offset by inflation and higher usage across several items, most notably avocados, dairy and chicken, in addition to the mix impact from limited time offers," Boatright said. "Relative to our guidance, avocados were favorable as the year-over-year step-up was less than we anticipated, and our supply chain and in-restaurant initiatives began to offset the increase in usage from last year."

For Q2, the company expects the cost of sales to be in the high 29% range as the mix benefit from Chipotle Honey Chicken will be more than offset by higher inflation across several items, the normalization of avocado prices and the impact of the newly enacted tariffs, including aluminum and the broad based 10% tariff.

"We estimate these tariffs will have an ongoing impact of about 50 basis points," Boatright said. " And due to inventory on hand, we anticipate a 20 basis point impact in Q2, which is included."

Those estimates do not include any impact from the tariffs that were postponed or the 25% tariffs on Mexico and Canada since Chipotle's imports fall under the USMCA exemption.

Still, the chain is moving in the right direction, according to Boatright, who said supply chain savings and improved execution has helped to offset over half of the 60 basis point investment made in 2024 to ensure consistent and generous portions. He expects a full offset by the back half of the year through several in-restaurant initiatives, including the launch of produce slicers.

"We still anticipate underlying cost of sales inflation to be in the low single-digit range for the full year, which excludes the normalization of avocado prices, the mix impact from LTOs, the portion investment and any impact from tariffs," he said.

Back-of-house equipment innovation

While he can't control the economy, Boatright said he was focused on amplifying technology and innovation, testing tools to modernize kitchen prep without compromising the culinary experience.

A Chipotle employee uses Autocado, an avocado-slicing cobot. Photo: Chipotle

"We remain on track to have the produce slicer in all restaurants by this summer, which will improve the speed of prep and improve the culinary by ensuring consistent cut sizes for onions, bell peppers and jalapenos," he said.

The team is also expanding the rollout of the equipment package to 100 locations. It includes a dual-sided plancha, three-pan rice cooker and a high-capacity fryer.

"Based on the results, we can accelerate the rollout to all restaurants, which we believe we can complete over the next several years," he said. "While we do anticipate that we will realize efficiencies from these initiatives, some of this will be invested back into our restaurants to enhance the experience for our teams and our guests. This will enable our crews to be properly deployed during peaks, driving better throughput and a better guest experience. It will also improve and drive better consistency across culinary, which is key as we continue to scale this great brand."

Lastly, the chain is making progress with its Autocado, an avocado-slicing cobot, and its augmented digital make line.

"We have gone through several iterations, including in restaurant testing and over the last couple of months, both were back at our Cultivate Center for additional enhancements, Boatright said. "Autocado is now back in a restaurant for further testing and our augmented digital make line will be back in a restaurant later this summer.

Catering makes up only 1.5% of sales at Chipotle.

Rethinking the catering business

Catering, which Boatbright said was only 1.5% of sales with little or no marketing, is also primed for growth.

"We are also rethinking our catering business, which we see as an opportunity long term," he said. "We'll roll out a catering test this fall in one of our sub-regions. Our tests will include the new equipment package, additional storage as well as new technology to best allocate orders and drive demand. We can then see if it allows us to effectively scale the catering business without impacting our core business."

Q1 highlights, year over year:

• Comparable restaurant sales decreased 0.4%.
• Operating margin was 16.7%, an increase from 16.3%.
• Restaurant level operating margin1 was 26.2%, a decrease from 27.5%.
• Diluted earnings per share was $0.28, a 7.7% increase from $0.262.
• Adjusted diluted earnings per share1 was $0.29, a 7.4% increase from $0.27.
• Opened 57 company-owned restaurants with 48 locations, including a Chipotlane, and two international licensed restaurants.