Chipotle continues to disappoint

Under pressure for several quarters now, the burrito chain is facing its most difficult period since 2017, when the group was rocked by a series of health scandals. Today, the stock is down 18% following the release of its Q3 figures and outlook.

2025 is a complicated year for companies that have to deal with rising costs in an uncertain consumer environment. The fast food sector is on the front line, and Chipotle, which has steered its ship brilliantly in recent years, now finds itself caught in a vice.

The burrito chain has built its model on the claim of excellent value for money thanks to its high-quality ingredients. The first price increases to offset the surge in the cost of beef, avocados (key ingredients in Chipotle restaurant recipes), and transportation in 2022 were accepted without much protest, as customers had saved heavily during the Covid pandemic.

The following two years were marked by the dilemma of wanting to maintain margins without significantly impacting restaurant traffic. The group appears to have succeeded in this, as the last financial year was a record one in all respects: especially in terms of revenue, margins, and free cash flow. 

The backlash is now here. Some customers no longer find the value for money they once did. The younger generation in the US is affected by rising unemployment, the resumption of student loan repayments and low wage growth. This limits their spending power on leisure activities. Donald Trump's trade policies are not helping the company to source supplies either...

Chipotle has therefore reduced its 2025 targets for the third time this year. But this time, the group will have no choice but to sacrifice its margins, as price increases have already been pushed to the maximum. It can no longer afford to risk a further decline in customer traffic. In addition, internal failures have been noted, particularly in terms of cleanliness and service. Responses to these issues will also be expected in future publications. 

For the year, Chipotle anticipates a low single-digit decline in comparable store sales, which would be a first since 2015. Current growth is only being sustained by the opening of new restaurants: between 350 and 370 openings are expected next year. The group can also count on international expansion, even though competition is now fierce wherever it goes. Asia is one possibility for it.

This explains the sharp reaction in the stock and its very poor performance so far this year (-35%). Its valuation is at a ten-year low, although is still well above comparable listed companies. Visibility is currently too low. Chipotle will need to reassure its investors in 2026. Without that, the stock does not seem likely to achieve much.