Chipotle 3rd-Quarter Net Up 20%, But Miss Expectations

   By Ben Fox Rubin 
 

Chipotle Mexican Grill Inc.'s (CMG) third-quarter profit rose 20% as the fast-casual burrito chain's revenue and restaurant margins continued to rise.

But, shares sank 10% after hours to $257.03 as the company's results missed expectations. As of Thursday's close, the stock was already down 28% over the past three months.

The burrito chain, long an investor favorite, has seen its stock dragged down since April amid investor concern about slower growth in customer traffic and sales. The stock took a big hit in July after it reported its second-quarter results, which included weaker-than-expected revenue and substantially slower same-restaurant sales growth.

Despite the stock declines, hedge fund manager David Einhorn recently said Chipotle still had a "nosebleed valuation," and its customers would prefer rival Yum Brands Inc.'s (YUM) new higher-end "Cantina Bell" burritos and burrito bowls, sold at its Taco Bell chain. His comments further pressured the stock.

Looking to maintain its strong growth, Chipotle is working on expanding in Europe and has been pushing to speed up its sometimes discouragingly long lines during the lunch and dinner rushes.

In the latest period, same-store sales rose 4.8%, below expectations of 5.4% from analysts polled by Thomson Reuters. In the past, Chipotle has posted double-digit same-store sales growth, including an 11% rise a year ago.

Restaurant-level operating margin widened to 27.4% from 26.7%, though costs for food, beverage and packaging rose 17%.

Chipotle posted a quarterly profit of $72.3 million, or $2.27 a share, up from $60.4 million, or $1.90 a share, a year earlier. Revenue grew 18% to $700.5 million, below recent growth above 20%.

Analysts predicted earnings of $2.30 a share on revenue of $702 million.

Write to Ben Fox Rubin at [e-mail]

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