Chipotle Mexican Grill, Inc. 3Q17 Earnings Miss Sends Stock Diving

Chipotle Mexican Grill 3Q17 earnings were released after closing bell, and the company reported non-GAAP earnings of $1.33 per share on $1.13 billion in revenue. Wall Street had been expecting earnings of $1.63 per share on $1.14 billion in sales. In last year’s third quarter, the fast-casual dining chain reported earnings of 79 cents per share on $1.037 billion in revenue.

Chipotle Mexican Grill 3Q17 earnings

On a GAAP basis, Chipotle Mexican Grill 3Q17 earnings rose to 69 cents per share from 27 cents per share last year. Comparable restaurant sales grew 1% year over year, versus the 1.2% StreetAccount consensus, while the restaurant-level operating margin expanded to 16.1% from 14.1% last year. Net income was $19.6 million, while food costs were 35% of revenue, a decline of 10 basis points year over year.

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Several firms slashed their price targets and estimates for Chipotle Mexican Grill going into tonight’s earnings release. UBS had been expecting same store sales to grow 0.5% year over year, but the firm slashed that estimate all the way down from 2.5% previously.

Other firms noted weak same store sales growth among other fast-casual dining chains as well. Knapp-Track data showed a 5.6% decline among all fast-casual dining chains, versus last year’s 2.1% decline and the 1.5% growth that was recorded in 2015, SunTrust analysts explained.

Before the Chipotle Mexican Grill 3Q17 earnings release, data from the UBS Evidence Lab pointed to historic low levels of customer satisfaction based on analysis of approximately 137,000 online reviews. The firm said scores have fallen 6% since March. Chipotle’s queso launch was particularly disappointing as over half the reviews that mentioned the quesos were negative. The Chipotle Mexican Grill 3Q 2017 earnings release included little to no mention of quesos.

“Our strategic initiatives in operations, innovating our digital sales platform, new menu introductions, and marketing the brand are starting to take hold,” founder, Chairman and Chief Executive Steve Ells said in a statement about the Chipotle Mexican Grill 3Q17 earnings. “Despite several unusual impacts during the quarter, including the impact of hurricanes, we maintained our focus and saw some encouraging signs. ”

Chipotle Mexican Grill slashes growth outlook

For all of 2017, Chipotle Mexican Grill expects comparable restaurant sales to grow by about 6.5%, while it had previously been projecting high-single-digit growth. For all of 2018, the company expects to open 130 to 150 new restaurants.

Following the Chipotle Mexican Grill 3Q17 earnings release, the company’s stock plunged, falling by as much as 5.03% to $308 in after-hours trades.