Chipotle Continues to Set the Pace for Fast-Casual Restaurants

Chipotle Mexican Grill (NYSE:CMG) has become the standard for restaurant perfection, as not even bad winters and intense promotional activity can keep its growth from exceeding 20 percent-plus year over year. But perhaps most impressive is the fact that in the first quarter, when all of these hardships existed, Chipotle’s comparable sales rose 13.4 percent.

In comparison, fast-casual peers like Noodles & Co. (NYSE:NDLS) and Potbelly (NYSE:PBPB) saw their comparable sales decline 1.6 percent and 2.2 percent, respectively, in the same period. Chipotle has defied the odds, and with menu pricing it’s doing it once more, trading higher for good reason. Despite Chipotle’s near-flawless first quarter, its stock did see a decline from north of $600 to below $500 following earnings.

Like most restaurants, Chipotle saw costs rise in the quarter, approximately 150 basis points, which had a negative impact on operating margins of 40 basis points. It was this concern of rising food costs and the fear of lower margins that then resulted in Chipotle’s rather significant stock losses. With that said, Chipotle has staged a rather impressive stock rally from below $500 to more than $550 in the last couple of weeks.

Why might this be? According to RBC Capital, Chipotle has been consistently and seamlessly rolling out higher prices. The firm tracked prices at Chipotle stores in 11 major cities and found that overall menu prices have increased 6.5 percent while side items and drinks have increased 7.3 percent in recent weeks.