BOOrito! Chipotle Is Considering a Menu Price Hike
Based on its latest earnings, it is clear that Chipotle (NYSE:CMG) is now one of the most popular fast food establishments, but that’s not entirely good news for its consumers. Thanks to Chipotle’s ongoing success, there have been discussions about the chain possibly executing a price hike of 3 to 5 percent in the second half of the year. According to USA Today, the call for higher prices comes from higher costs for avocados and other ingredients, the company’s operating margin improving as a results of lower costs in other areas, and the confidence that its customers will still visit locations, even if it costs more to score a burrito.
Chipotle released its latest earnings Thursday and said that sales rose 9.3 percent at established locations in the last three months of the year. One of the chain’s main rivals, McDonald’s (NYSE:MCD), reported a decline of 1.4 percent for the same period, while Starbucks (NASDAQ:SBUX) reported a rise of 5 percent. The same-store sales figure is generally considered a good indicator of a company’s health, because the metric doesn’t take into account the volatility of newly opened or closed locations.
So, it looks like Chipotle is pretty well off, especially considering many fast-food restaurants are now struggling to stay above water at a time when consumers are more health conscious than ever, and less and less people are eating out. The lines at Chipotle are always long, and that’s one reality the company’s executives would like to sustain, but according to USA Today, they still expressed possible interest in a price hike when they took questions from analysts following the earnings release Thursday. When one analyst asked Chipotle why the company would risk hurting its brand by raising prices when it doesn’t need to, an executive replied that was among the considerations in deciding whether to go ahead with the hike.