What is in this article?:
- Chipotle stock rises on upgraded outlook
- The cost of 'food with integrity'
Company officials said that sales started to rise in April after the weather improved.
Mexican Grill Inc. upgraded its outlook for the year after seeing traffic strengthen in the second quarter, sending the company’s stock prices soaring.
In early trading Friday, the chain’s stock rose 7.16 percent to $403.71, topping the high for the previous 52 weeks of $404.59.
After reporting a 7.6-percent increase in net income for the June 30-ended quarter on Thursday, company officials said in a call with Wall Street analysts that same-store sales started to climb in April after the weather improved. They added that the trend has continued into July.
The chain’s same-store sales rose a modest 1 percent in the first quarter but increased 5.5 percent during the second quarter. An extra trading day in the recent quarter helped, but about 4.5 percent of that increase was attributed to transaction growth.
The Denver-based company now projects same-store sales growth for the year of low-to-mid single digits. Previously, the company said it expected flat to a low-single-digit increase in comps.
Analysts scrambled to adjust their expectations for the chain on Friday, noting Chipotle’s standout performance for the industry.
In a report Friday, Mark Kalinowsky of Janney Capital Markets offered his “tip of the sombrero,” saying, “We were pleased with the 5.5-percent Q2 same-store sales performance in the context of what had been a weaker-than-expected quarter for the chain restaurant industry as a whole.
“The casual-dining sector disappointed. The quick-service burger/sandwich segment disappointed. Other fast-food areas took a turn for the worse during June. Family dining remained sluggish. And yet, through all this, Chipotle exceeded expectations,” he wrote.
Stephen Anderson of Miller Tabak + Co. LLC noted in a report that Chipotle’s second-quarter traffic gains don’t yet show the benefit he expects from the planned closure of 67 underperforming units by competitor Qdoba Mexican Grill, which is expected to be completed by September.
“Many of those closures already occurred by the end of June, mostly in key [Chipotle] markets such as Manhattan, Chicago and Southern California,” Anderson wrote. “We had said the market share–related lift to comps would occur in 4Q13, but based on the earlier-than-expected closures, we think [Chipotle] will realize the 50-basis-point lift to comps as early as 3Q13.”