Chipotle Mexican Grill on Tuesday reported quarterly earnings that topped analysts' expectations and announced plans to accelerate its introduction of drive-thru lanes, which could slow down its store openings.
Shares were down 2% in premarket trading Wednesday. The stock had closed down 2.3% amid broader losses in the restaurant sector on Tuesday. Chipotle's stock, which has a market value of $23 billion, is up 92% so far this year, as of Tuesday's close.
"We're pleased with our overall results in the quarter, which reflects further progress on our key strategic initiatives to provide a great guest experience and position Chipotle to deliver above industry growth for many years to come," CEO Brian Niccol said in a statement.
Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
Chipotle reported fiscal third-quarter net income of $98.6 million, or $3.47 per share, up from $38.2 million, or $1.36 per share a year earlier.
Excluding items, the chain earned $3.82 per share, topping the $3.22 per share expected by analysts surveyed by Refinitiv.
Net sales rose 14.6% to $1.4 billion, meeting expectations of $1.4 billion. Digital sales grew 87.9% and accounted for nearly a fifth of Chipotle's sales this quarter. Since its launch in March, Chipotle has added 7 million members to its loyalty program.
Sales at stores open at least a year grew by 11% during the quarter, in its biggest jump in more than two years.
During the quarter, the average check size rose 3.5%, helped by menu price increases that were put in place in 2018.
Last month, Chipotle launched its first new protein since it added chorizo three years ago. Carne asada, which is priced 50 cents higher than its original steak, will only be available for a limited time. Executives said that Chipotle's supply of carne asada is expected to run out at the end of November or early December but could return to the menu at some point.
Niccol said that the company limited the offering of carne asada in part because of a limited supply of premium-cut steak that followed Chipotle's rigorous supply chain standards.
As a more premium cut of steak, carne asada is also costing Chipotle more.
"That puts a little pressure on food costs," CFO Jack Hartung said.
In addition to higher costs for several ingredients, Chipotle said that wage inflation and increased delivery costs weighed on profits.
Menu changes under Niccol are expected to keep coming. He told analysts on the conference call that in addition to long-awaited quesadillas, Chipotle is also testing salads.
Chipotle also announced changes to its plan for store openings. It is now forecasting that it could open fewer than 140 to 155 new stores in fiscal 2019. In 2020, the chain plans to open between 150 to 165 new locations, with more than half including a "Chipotlane."
The company has been testing special drive-thrus for digital order pick-up. As a result of successful tests in 20 restaurants, the chain is now planning on putting Chipotlanes in half of its restaurants currently under construction. The longer time period associated with adding the drive-thru lanes to more than 40 restaurants means that some openings are expected to be delayed into 2020.
Niccol said that the company is working on its Canadian business and could accelerate expansion if it continues to improve. But outside of North America, expansion will be slower.
"We're still probably in the earlier innings in Europe, because we're still learning there what we can do with our Chipotle business," he said.
Executives also said that the company has finished renovating restaurants with second assembly lines, which are meant to make delivery and pick-up orders.