Higher food, labor costs chip away restaurant level margins, despite menu price increases
Higher wages and food costs cut into Chipotle Mexican Grill’s restaurant-level margins, despite increases to menu prices and lower delivery expenses, the company said Tuesday.
For the first quarter ended March 31, Chipotle said its restaurant level operating margin was 20.7%, down from 22.3% in the first quarter last year. Food, beverage and packaging costs were 31% of total revenue, an increase of 100 basis points over Q1 2021.
Across the industry, restaurants are facing higher costs as a result of lingering COVID-related supply challenges and the war in Ukraine.
Still, the Newport Beach, Calif.-based chain said same-store sales increased 9% for the quarter, and total revenue increased 16% to $2 billion. Net income for the quarter was $158.3 million, or $5.59 per share, compared with $127.1 million, or $4.52 per share, a year ago.
“Chipotle’s performance in the first quarter was strong, despite challenges from the Omicron variant and on-going inflation,” said Brian Niccol, Chipotle’s chair and CEO, in a statement. “Our investments in people, coupled with our digital system and commitment to culinary driven by Food With Integrity resulted in serving more guests at our restaurants with excellence.”
Digital orders during the quarter accounted for 41.9% of sales — down from 49% in the prior quarter — but the company changed the way it keeps track of sales to attribute revenue deferrals associated with Chipotle Rewards.
For the second quarter, Chipotle projected same-store sales in the 10% to 12% range. This year the company expects to open between 235 and 250 new restaurants, including five to 10 relocations to add a Chipotlane, assuming construction and permitting delays don’t get worse.
During the first quarter, the company opened 51 restaurants, including 42 with the drive-thru Chipotlane access.
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