By Dhirendra Tripathi
Investing.com – Chipotle Mexican Grill stock (NYSE:CMG) surged 6.5% in premarket trading Wednesday after the burrito chain overcame higher raw material costs and a labor crunch to beat earnings estimates in the fourth quarter.
Total revenue rose 22% to $2 billion, thanks to its ability to pass on higher costs for beef, avocados and freight to consumers. Price increases also helped tackle higher packaging and freight costs, putting Chipotle among the few who successfully navigated those challenges at a time when McDonald’s MCD and Starbucks SBUX missed profit estimates.
Reuters quoted Chief Executive Officer Brian Niccol as saying there has been "no resistance" to higher prices. As such, operating margin expanded by 0.7 percentage point to 20.2% at the restaurant level, according to the company.
Comparable restaurant sales were up more than 15%, while digital channels grew in importance to account for nearly 42% of total sales. Adjusted profit per share was up 60% at $5.58, helped by lower impairment costs compared to last year.
Chipotle expects sales growth to slow to around 8% in the current quarter. However, it raised its medium-term target for opening new locations in North America to at least 7,000 versus 6,000 earlier -- saying it want to expand particularly in smaller towns.