NEW YORK (TheStreet) - Expect your Chipotle (CMG) burrito bowl to be more expensive in the next few months. Suffering from higher food costs, especially in meat, cheese and avocados, the Denver-based burrito chain is finally doing what Wall Street has long expected - it's raising menu prices.
During a conference call on Thursday to discuss the company's first-quarter earnings, Chipotle didn't say exactly how much menu prices would rise, just that the increases would be on average in the mid-single digits. It expects to start installing new menu boards with the new pricing late in the second-quarter, and be fully rolled out by early in the third quarter. Chipotle executives noted that the last time it raised menu prices was nearly three years ago.
The news comes as Chipotle said that first-quarter net income rose 8.5% to $83.1 million, or $2.64 a share, missing analysts' estimates by 22 cents, according to Thomson Reuters. Revenue rose 24.4% to $904.2 million, beating the average estimate of $874 million.
The company said that comparable restaurant sales rose 13.4% in the March-ending quarter, compared to estimates of 8.8%, as tallied by Consensus Metrix. Chipotle attributed the growth to increased traffic and to a lesser extent an increase in average customer checks. Comps also benefited from one extra trading day in the quarter as compared to the first quarter of 2013.
Restaurant level operating margins fell 40 basis points to 25.9% during the quarter, from higher food costs partially offset by "favorable sales leverage" in labor and occupancy costs. Food costs were 34.5% of revenue, an increase of 150 basis points driven by higher commodity costs as a result of "inflationary pressures" in beef, avocados, and cheese prices, the company said. Additionally, general and administrative costs were 7.4% of revenue, up 130 basis points from the prior year period from "higher non-cash, non-economic stock compensation expense, and to a lesser extent from higher litigation costs," the company said in its earnings release.