Chipotle forecasts weak annual sales, margin pressure as consumers cut discretionary spending

By Anuja Bharat Mistry

Feb 3 (Reuters) – Chipotle Mexican Grill said on Tuesday it expected to raise menu prices this year as it wrestled with higher raw material costs and a tough labor market, and forecast margins would remain under pressure as customers pulled back on dining out amid ongoing economic uncertainty.

Shares of the company, which said it expects to raise menu prices in the 1% to 2% range this year, were down about 7% after the bell.

Persistently rising food prices and a soft labor market are curbing demand for discretionary spending like dining out, with lower‑income households struggling the most to keep up, even as higher‑income consumers keep up their expenditure.

“Margins in 2026 will be under pressure, and it’s mostly due to our investment of taking less price compared to the inflation that we’re experiencing,” finance chief Adam Rymer said in a post-earnings call.

Chipotle now expects fiscal 2026 same-store sales to be about flat, compared with analysts’ estimate of a 1.86% rise, according to data compiled by LSEG.

“Coupled with brand investment, it (pricing strategy) should stand to benefit the firm’s value proposition in the eyes of consumers, but also crimp near-term margins, given the firm won’t fully offset labor and food inflation in the coming year,” said Ari Felhandler, analyst at Morningstar.

Chipotle warned in October that consumer spending would remain pressured through early 2026, noting pullbacks among U.S. households earning less than $100,000 a year – a group that accounts for about 40% of its sales.

Prices of beef, which makes up the biggest commodity for Chipotle, hit record highs in the U.S. as drought forced ranchers to shrink the cattle herd to its smallest size in 75 years.

However, it reported quarterly sales of $2.98 billion, compared with analysts’ estimate of $2.96 billion. It earned adjusted profit of 25 cents per share, edging past an estimate of 24 cents per share.

(Reporting by Anuja Bharat Mistry in Bengaluru; Editing by Pooja Desai)