Chipotle Q3 2014 earnings: People still love burritos even though prices are higher.

Chipotle’s Magical Burrito Empire Keeps Growing, Might Be Slowing

Chipotle’s Magical Burrito Empire Keeps Growing, Might Be Slowing

Moneybox
A blog about business and economics.
Oct. 20 2014 7:23 PM

Chipotle’s Magical Burrito Empire Keeps Growing, Might Be Slowing

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$2.30 for guac? Not a problem.

Photo by Joe Raedle/Getty Images

Chipotle is no longer cheap. In New York City, a nationwide hike in menu prices means that a chicken burrito costs $8.27, a steak burrito $8.96, and a carnitas burrito $8.73. Want guacamole? That will be another $2.30. But so far, Chipotle consumers have yet to blink.

That's the takeaway from Chipotle's third-quarter earnings, which it reported Monday afternoon. Sales at restaurants jumped 19.8 percent over the same period the prior year on increased foot traffic, and profit soared 56.9 percent to $130.8 million. The company's operating margin came in at 28.8 percent. For the sake of comparison, comparable sales were flat at McDonald's in the second quarter and profit declined 1 percent. At Yum Brands' KFC, Pizza Hut, and Taco Bell, sales fluctuated in both directions by a few percentage points in the third quarter and the highest margin (at Taco Bell) was 20.7 percent.

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"We are extremely pleased with our performance for the third quarter," Chipotle CEO Steve Ells said in the earnings release. "Recent industry trends suggest the Chipotle model is resonating with customers, who are realizing there are better alternatives to traditional fast food." That model—"fast casual"—is often described as the sweet spot of the dining world: to provide the ambience and food quality of a casual sit-down restaurant while maintaining the quick service of a fast-food establishment. "This formula has worked extremely well for us since the beginning—and others are starting to notice," Ells said on the company's earnings call. In a July ranking of 65 fast-food and fast-casual restaurants by around 32,000 customers, Ells said Chipotle topped the list. Chipotle has also built strong consumer loyalty, keeping people coming even as menu prices climbed higher.

Despite the strong results, shares of Chipotle dropped a little more than 4 percent after the bell on a conservative sales forecast for 2015. Unlike the double-digit growth of the last quarter, Chipotle said it expects "low to mid-single digit" sales growth at restaurants in the following year. And some good news for customers: At least for now, Chipotle executives aren't planning another menu price hike in 2015. Guacamole for everyone!

Alison Griswold is a Slate staff writer covering business and economics.