Chipotle (CMG) on Wednesday reported another quarter of negative sales growth, sending shares sharply lower in extended trading as the company navigates an uncertain consumer environment and its new leadership deals with the most challenging backdrop for the chain in years.
Chipotle reported same-store sales fell 4% in the second quarter, more than the 2.9% decline Wall Street expected, according to Bloomberg data.
Traffic also fell more than expected, falling 4.9% against the 4.4% drop that had been forecast by the Street. That’s an acceleration from the 2.3% drop seen in the first quarter, which marked Chipotle’s first quarterly foot traffic decline since 2022.
Shares of the fast-casual chain were down as much as 9% in extended trading on Wednesday.
Chipotle also cut its guidance again, saying it now expects flat full-year same-store sales growth, compared to an increase in the low-single-digit range. Ahead of Wednesday’s report, analysts expected same-store sales to grow 0.8% for the fiscal year.
CEO Scott Boatwright told investors that “ongoing volatility in our trends in the consumer environment” prompted the company to cut its full-year same-store sales forecast.
Earnings were in line with forecasts, tallying $0.33 per share on an adjusted basis. Revenue missed forecasts, coming in at $3.06 billion, below the $3.11 billion analysts had expected.
“We did see some share loss in the April-May time frame as the low-income consumer pulled back, but we’re back to share gains yet again in June-July,” Boatwright told investors on the company’s earnings call.
Boatwright added the company is “trending along with the macro and consumer sentiment at this point, and so I don’t have overarching fears.”
Still, the exec admitted he believes its perceived value proposition isn’t translating to consumers in the same way it did this time last year.
“We’ve got to figure out a way we can communicate value for the consumer and showcase the value we are to QSR and fast casual,” he said. “There’s more work to do there, and that’s what we’ll lean into in the back half of the year.”
Boatwright told investors the company expects to return to positive transaction growth in the second half of the year.
Chipotle expects tariffs to raise its cost of sales by 0.5% on an ongoing basis, with the company forecasting an additional 0.4% impact in the third quarter.
In mid-June, the company launched Adobo Ranch, its first new dip since Queso Blanco. William Blair analyst Sharon Zackfia wrote in a note to clients prior to the report this new item “seemed to yield both improved traffic and ticket given the associated upcharge.”
CFO Adam Rymer said the company saw “strength” with sides, including the Adobo Ranch, which came “late in the quarter,” but “other items like guac, queso chips, even drinks” held up “really nicely.”
An increased cadence of limited-time offerings, more sides and dips, leaning into its reward members, and its catering business will help it return to positive growth, Boatwright said.
“I’m confident … that we have a path to get back to mid-single-digit growth and return us back to where we need to be in the coming months.”