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Chipotle Earnings To Soar As Wall Street Parses Wage Gains, Industry Rebound

Chipotle Mexican Grill (CMG) reports second-quarter earnings after the close today. Chipotle stock crept higher.




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The fast-casual Mexican chain reports after announcing a wage increase for employees, resulting in a bump in menu prices. The restaurant industry is rebounding from coronavirus lockdowns last year, but has faced difficulties attracting workers.

Chipotle Earnings

Estimates: Wall Street expects Chipotle to earn $6.53 per share, according to FactSet, a more than sixteen-fold jump. Revenue was seen increasing 38% to $1.883 billion.

Analysts expect a 30.1% same-store sales gain, as the company laps pandemic-era lows from last spring.

Results: Due after the close.

Chipotle Stock

Shares rose 1% to 1567.87 in the stock market today. Chipotle stock has been trying to break out of a cup base with a 1579.62 buy point. The stock cleared that entry earlier this month but is now back below it.

Shares have a strong Composite Rating of 98. The stock’s EPS Rating is 91.

Domino’s Pizza (DPZ), which reports earnings on Thursday, slipped 0.2%. McDonald’s (MCD) rose 1.6% to 232.83. Shares of the burger chain are near a 238.28 buy point.

Chipotle stock has largely moved higher since last year, as its digital-ordering infrastructure helped maintain sales momentum during the pandemic. However, analysts continue to wonder how much more room shares have for more gains.

Chipotle in May said it was looking to hire 20,000 employees across the U.S. And it said it would raise wages for restaurant workers, resulting in “a $15 average hourly wage” by the end of June. The increases, Chipotle said, would put hourly-staff starting wages at between $11 and $18 per hour.

The wage increase brought a corresponding price increase on menu items of around 4%.


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‘Chipotlanes’ And Delivery

William Blair analysts who cover Chipotle stock, in a research note on Monday, also noted that the chain has increased prices on its delivery menu. Fees charged by delivery apps have pushed its expenses higher. Chipotle also faces higher beef and avocado costs.

The pandemic helped popularize digital ordering and delivery, from the likes of DoorDash (DASH), Grubhub and Uber Eats. But the commission fees online ordering platforms charge restaurants can run as high as 30%, raising concerns over whether smaller independent restaurants can absorb the costs.

Still, the William Blair analysts expected strong sales gains for Chipotle for the rest of the year.

“Given healthy trends alongside price increases, we now expect Chipotle to maintain double-digit comps throughout the remainder of 2021,” they said.

However, they added that “we expect restaurant-level margins to sequentially decrease to 22.5% to 23.5% in the second half of the year given the aforementioned hourly wage increases and the seasonality of the business.”

Chipotle has been investing in the rollout of its “Chipotlane” drive-thru lanes, which are geared toward digital orders. The company in March also said it had invested in Nuro, an autonomous delivery vehicle startup. Chipotle said then that it planned to eventually test the company’s cars.

Domino’s in April said it and Nuro had launched autonomous delivery service in Houston.

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