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Chipotle says higher beef, freight costs will eat up menu price hikes By Reuters

© Reuters. FILE PHOTO: Clients order from a Chipotle restaurant as pre-Thanksgiving and Christmas vacation purchasing accelerates on the King of Prussia Mall in King of Prussia, Pennsylvania, U.S. November 22, 2019. REUTERS/Mark Makela/File Picture

By Praveen Paramasivam and Hilary Russ

(Reuters) -Chipotle Mexican Grill Inc beat estimates for earnings and comparable quarterly gross sales on Tuesday however warned that larger beef and freight prices will offset the good thing about menu costs hikes within the close to time period.

Eating places have been affected by outages of all the pieces from inexperienced tea to paper luggage, in addition to labor shortages, because the U.S. economic system has reopened following pandemic-related lockdowns.

Within the present quarter, commodity prices and staffing shortages at suppliers will principally cancel out the three.5% to 4% menu value enhance initially applied to pay for larger wages, Chief Monetary Officer Jack Hartung mentioned in a name with analysts.

“It should not be a shock to anybody that Q3 goes to be challenged by a number of industry-wide points,” Hartung mentioned.

Gross sales on the burrito and bowl chain, which had already recovered through the COVID-19 pandemic, grew even stronger as restrictions eased and People trickled again to workplaces and ordered extra lunch.

Excluding one-time objects, the corporate posted earnings per share of $7.46 for the second quarter ended June 30, crushing estimates of $6.52 and sending shares up greater than 4% in prolonged buying and selling.

Comparable gross sales rose 31.2%, forward of Wall Road expectations of 29.4% progress, in keeping with IBES knowledge from Refinitiv.

Chipotle (NYSE:) mentioned it expects third-quarter gross sales progress within the low to mid double-digits vary, in contrast with estimates of 9.7%.

Web revenue was about $188 million, or $6.60 per share, for the quarter, in contrast with $8.2 million, or 29 cents per share, a yr earlier.

Restaurant working margin was 24.5% – a rise from 12.2% within the second quarter of 2020 and the very best degree because the third quarter of 2015.

Greater margins got here regardless of elevating worker pay to a median $15 an hour by late June – due to menu value hikes.

To this point the corporate has seen “no resistance” to larger menu costs, Hartung mentioned.

The chain additionally opened 56 new areas through the quarter, together with 45 with order-ahead drive-through “Chipotlanes,” placing it on monitor to fulfill or barely exceed its earlier expectation of constructing about 200 new eating places this yr.

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