Chipotle Mexican Grill Drops After Downgrade

NEW YORK (AP) — Sales will be pressured and costs will rise for Chipotle Mexican Grill Inc., an analyst said Friday, downgrading the stock.

Chipotle shares fell $2.99, or 3.4 percent, to $85.91 in afternoon trading.

Oppenheimer & Co. analyst Matthew DiFrisco downgraded the burrito chain's stock to "Underperform" from "Perform" and cut his earnings estimates through 2010.

Rising unemployment — which climbed to 9.4 percent in May, according to the Labor Department — will pressure sales, he predicted. In April, Chipotle said same-store sales increased 2.2 percent in its fiscal first quarter on the back of raised prices for its burritos and tacos, even as customer traffic dropped. Same-store sales, or sales at stores open at least a year, are a key measure of restaurant performance.

Further, chicken prices have risen 15 percent since April 22, when Chipotle announced its first-quarter earnings, which will put pressure on profit margins, DiFrisco said.

He says it will be tough for Chipotle to meet its goal of opening 120-130 new stores a year as the commercial real estate market remains strained.

DiFrisco cut his earnings estimate for 2009 to $2.96 from $3.05. He also cut 2010 estimate by 43 cents to $3.40.

Analysts polled by Thomson Reuters expect profit of $3.03 this year and $3.49 next year.