This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Is Growth on Chipotle's Menu?

However, this is not the same bulletproof company that once had the Street believing valuation didn't matter. The Street now seems schizophrenic in how it wants to appraise the business, which has also impacted upon the stock.

There is no sign the rising cost of food, up 22% in the quarter, is going to slow. This is one of the reasons why rivals including McDonald's have begun to adjust menu items and prices.

Although Chipotle said that it plans to raise the prices on its menu, this may have an adverse effect in a challenged economy. Chipotle showed better cost management to offset the rising cost of beef but the company still has to answer that important question: Where's the growth to come from this year and beyond?

While commenting on the company's results, Steve Ells, Chipotle's chairman and CEO, mentioned (among other things) the company may consider catering at some point this year. Catering sounds "different," but without knowing the associated costs it's tough to get bullish on the concept.

I'm not certain this will have much of an impact in the near term. Investors who are paying for growth today want assurances that margin and comps will begin to move in the right direction again.

Unfortunately, management only guided for flat to low-single-digit comps for all of 2013. While Chipotle prides itself on being different, I'm not so certain that it is. Yum's Taco Bell has a similar business model and so does Qdoba Mexican Grill, which is owned by Jack In The Box (JACK). The latter is struggling to compete and posted just 2.4% growth in comps for the fiscal 2012.

Bottom Line

From the standpoint of Chipotle being different, I haven't been able to tell. Chipotle is seen as a "new concept" but it really isn't. Taco Bell has been doing the same thing for years.

Perhaps Chipotle management believes catering will make the difference. Raise your hand if you've never heard of catering before.

Chipotle needs to be more forthright about the competition, and investors need to be more realistic about expectations.

At the time of publication, the author held no position in any of the stocks mentioned.

2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
CMG $448.81 1.79%
AAPL $94.27 -0.76%
FB $101.00 1.47%
GOOG $684.12 0.89%
TSLA $143.67 -3.09%


Chart of I:DJI
DOW 15,914.74 -99.64 -0.62%
S&P 500 1,851.86 -0.35 -0.02%
NASDAQ 4,283.5920 +14.8290 0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs