Chipotle Profits Nosedive, Stocks Follow Suit

Chipotle Mexican Grill reported an 18.6% dip in profits this quarter, driven by soaring expenses that couldn’t be offset by increased online sales.

Those numbers actually beat projections amid the struggling restaurant industry, but that didn’t stop investors from dropping the company’s stocks 6%.

Chipotle has been a promising stock in recent years, with prices rising 60% this year, reports Reuters. Even it, however, has been harmed by the COVID-19 pandemic. Lockdowns and skittish customers have meant fewer in-person sales and more delivery expenses, eating into Chipotle’s profit margins.

Chipotle took some steps to address the changes, raising the price of delivery items. Digital sales have more than doubled since 2019, as customers prefer the limited contact of food dropoff.

The restaurant chain also brought back carne asada, a particularly popular menu item. The price increase doubled since its last appearance, but that wasn’t enough to save Chipotle's overall numbers.

The entire food industry is suffering from both consumer fear of COVID-19 and government-mandated safety regulations complicating the process of serving customers. Average restaurant profit margins fell almost 7% from 20.8% margins in 2019 to 19.5% margins in 2020.

Delivery isn’t as cheap as in-person sales, and customers buy more beverages when they’re eating in a restaurant. Still, Chipotle is cautiously optimistic about the near future, especially if the COVID-19 pandemic starts to get under control.

“If delivery shifts into in-store, order-ahead and pick-up, then I’d say our margins per share are headed on the way up,” said Chief Financial Officer John Hartung. “If delivery stays the same or increases, we’ll have some challenges.”