Chipotle (CMG) Stock Drops 7% Despite Beating Q4 Earnings

TLDR

• Chipotle stock fell 7% after-hours despite beating Q4 earnings with 25 cents per share and $2.98 billion revenue
• Same-store sales declined 2.5% while company opened 132 new locations in fourth quarter
• Management forecasts flat comparable sales for 2026 with 1-2% menu price increases planned
• Lower-income customers cutting dining spending as meals cost $10-$12 versus McDonald’s discount deals
• Company plans 350-370 new restaurant openings in 2026 despite margin pressure warnings

Chipotle reported mixed fourth-quarter results Tuesday that sent shares down 7% in after-hours trading. The fast-casual chain beat earnings estimates but warned of continued challenges ahead.

The company posted adjusted earnings of 25 cents per share on revenue of $2.98 billion. Analysts expected 24 cents per share and $2.96 billion in revenue.

The problem? Same-store sales dropped 2.5% year-over-year.

Chipotle Mexican Grill, Inc., CMG

Total revenue growth came entirely from opening 132 new restaurants during the quarter. Existing locations are seeing fewer customers walk through the doors.

Chipotle shares have fallen 34% over the past year. The stock now trades near historically low valuations.

Pricing Strategy Creates Margin Squeeze

Finance chief Adam Rymer delivered tough news on the earnings call. The company plans menu price increases of 1% to 2% in 2026.

Beef prices hit record highs as drought reduced cattle herds to 75-year lows. Labor costs keep climbing too.

Lower-income households are cutting back on dining out. Consumers earning under $100,000 annually represent 40% of Chipotle’s sales. This group is pulling back the most.

McDonald’s and other chains have rolled out aggressive discount deals. A typical Chipotle meal costs $10 to $12, making it less competitive.

Flat Sales Forecast for 2026

Management expects comparable restaurant sales to be flat in 2026. Analysts had projected 1.86% growth.

The company didn’t provide revenue or earnings guidance for the year. That suggests uncertainty about business trends.

Chipotle plans to open 350 to 370 new locations in 2026. The expansion continues despite current headwinds.

The chain is investing in kitchen equipment upgrades to speed up service. Marketing spending is increasing, focused on loyalty programs and limited offers.

Early data shows loyal customers ordering more frequently. But casual diners remain a challenge.

Analyst Views Split on Recovery

Deutsche Bank analyst Lauren Silberman expects foot traffic to turn positive in 2026. She believes holding off on major price increases will help competitiveness.

About two-thirds of analysts rate the stock a Buy. The average price target is $45, implying 18% upside.

Morningstar analyst Ari Felhandler noted the pricing strategy could benefit Chipotle’s value proposition. But near-term margins will suffer since price increases won’t offset inflation.

Management warned in October that consumer spending would stay pressured through early 2026. The company specifically cited households earning less than $100,000 annually as the weakest segment.

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