Chipotle shares plunge as investors chew on tariffs, weak spending

Audio By Carbonatix

Enlarge

By Savyata Mishra and Aishwarya Venugopal

(Reuters) -Shares of Chipotle Mexican Grill plunged about 19% on Thursday after its third sales forecast cut of the year fanned concerns around how the fast-casual chain is navigating tariffs, inflation and tighter spending by U.S. consumers.

A mixed set of earnings from major restaurants this quarter point to growing uncertainty about the economy: Chipotle and Starbucks have flagged margin pressures and softening demand, particularly among younger and lower-income consumers, while fast-food chains such as Burger King, Domino’s, and Shake Shack have benefited from value menu items.

Consumer sentiment has remained stubbornly weak in recent months even though high-income consumers continue to prop up overall spending in the United States. Other companies across the retail spectrum have flagged how shoppers have been trading down from brand names to private labels or shifting to more affordable options like Walmart. 

Still, Chipotle’s results caught investors by surprise, and analysts said its cost pressures could persist. Its market value fell by about $9 billion on Thursday, with shares on track for their worst day since July 2012. 

“In an environment with traffic declining, it is unlikely that consumers will give Chipotle the authority to raise menu prices. We expect this dynamic to result in significant margin contraction, not just for Chipotle, which can reasonably afford it, but for many of its competitors,” BTIG analyst Peter Saleh said.

President Donald Trump’s levies on imports of beef – Chipotle’s most bought ingredient – have pushed up costs for the burrito chain, but its executives promised a “slow and measured” approach to price hikes in 2026.

‘NOT JUST A CHIPOTLE PROBLEM’

Chipotle executives also pointed to a sharp pullback from U.S. households earning less than $100,000 a year, a cohort that accounts for about 40% of its sales and which the company categorizes as low- to middle-income.

Its customers aged 25-35 years are also under pressure from rising unemployment, resumed student loan payments and sluggish wage growth.

“We believe it’s more of a category problem, not just a Chipotle problem,” Stifel analyst Chris O’Cull said, while acknowledging some issues were self-inflicted, such as inconsistencies in digital order accuracy and ingredient availability.

Meanwhile, Starbucks, which posted its first quarter of comparable sales growth after more than a year, also indicated soft consumer spending and margin pressure due to rising coffee bean costs. Its shares were marginally higher in morning trading on Thursday.

Shares of fast-casual restaurant chains Cava and Sweetgreen fell 8% and 6%, respectively.

Chipotle and Starbucks shares have dropped 34% and nearly 8% so far this year, respectively. The S&P Composite 1500 Restaurants sub index is down about 1% in 2025, underperforming the broader S&P index’s gain of about 17%.

At least 19 brokerages cut their price targets on Chipotle, which trades at a 12-month forward price-to-earnings ratio of about 30.08, while at least three cut their targets on Starbucks, whose PE ratio stood at 32.13.

(Reporting by Akriti Shah, Savyata Mishra and Aishwarya Venugopal in Bengaluru; Editing by Devika Syamnath)