Chipotle, $CMG, has raised its prices by 2% across the US.
Chipotle Mexican Grill (NYSE:CMG) has raised its menu prices for the first time in over a year to offset rising ingredient costs, the company confirmed on Wednesday. The announcement boosted the stock to a five-month high in early trading, following speculation reported by The Wall Street Journal in late November.
"For the first time in over a year, we have taken a modest price increase of approximately 2% nationally to offset inflation," said a company spokesperson in an email.
Analyst Insights
Truist analyst Jake Bartlett views the price adjustment positively, stating, "We think Chipotle is taking the menu price from a point of strength," citing strong restaurant traffic in November and no major red flags related to operating cost inflation.
Bartlett adjusted his outlook accordingly, raising his price target for Chipotle by $2 and increasing earnings-per-share (EPS) estimates for Q4 and FY24 by $0.01 each, to $0.26 and $1.13, respectively.
Cost Analysis
While ingredient costs for commodities like chicken, beef, and dairy have decreased in the spot market, the price of avocados remains a notable exception. Avocado prices have surged 19%, driven by a brief import ban and poor yields in Mexico and Peru.
Market Outlook
Despite these challenges, Truist maintained a "Buy" rating for Chipotle, with a price target indicating a 21% upside from Tuesday’s closing price. The company’s ability to navigate inflation and maintain strong traffic underscores its resilience in a challenging economic environment.
