Chipotle Mexican Grill shares rose 7% in premarket trading on Thursday as investors responded positively to signs that CEO Scott Boatwright’s efforts to attract customers through new menu launches and increased marketing were beginning to pay off. The burrito chain expects comparable sales growth to reach around 3% to 4% by the end of the current quarter, improving from the 2.1% increase reported in the three months through September.
The company is strengthening its menu offerings and promotional activities to boost customer traffic. Chipotle announced the return of its smoked brisket for a limited period starting November 5, targeting the holiday and football seasons. However, rising beef costs and higher freight expenses driven by soaring diesel prices have put pressure on profitability. The chain plans to increase menu prices by approximately 3% in the fourth quarter to offset these higher costs.
Chipotle’s operating margin fell to 13.7% in the third quarter, compared with 15.9% a year earlier, while adjusted earnings per share of 27 cents fell short of market expectations. TD Cowen analyst Andrew Charles said the company’s willingness to sacrifice margins and invest in marketing had been underestimated. Despite emerging signs of stabilising customer traffic, at least four brokerages lowered their price targets for the stock. Jefferies analysts cautioned that a challenging economic environment could delay a meaningful recovery in sales.
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