Chipotle hints at a price increase
As cheaper rivals elbow in, the burrito chain may risk a price hike to counter higher food costs.
One of America's favorite burritos might cost more later this year, as Chipotle Mexican Grill (CMG) is considering raising prices to cope with faster-than-expected food inflation.
The chain of 1,350 burrito restaurants "won't rush" into the decision, the company's chief financial officer Jack Hartung said on Thursday, according to the Wall Street Journal.
The problem? Fresh ingredients -- a point of pride for the chain -- are becoming pricier and may eat into profits, the company said this week.
The move comes at a risky time for the 20-year old chain: Taco Bell recently rolled out a similar menu at a much cheaper price than Chipotle's.
Yum Brand's (YUM) Taco Bell last year introduced the Cantina Bell menu, which includes a premium burrito with black beans, guacamole and citrus-herb marinated chicken or beef for less than $5. Chipotle's average meal, meanwhile, costs about $9.
With ingredients such as cilantro-lime rice and naturally raised pork, Chipotle spends about a third of its sales on food costs. That's jumped about 1.3% in the past year because of the rising price of food, the company said on Tuesday.
The price increase would come after the chain looked at other ways to wring more efficiencies from its operations, the Journal notes. For instance, it's sped up food assembly and uses hand-held devices to take orders while customers are in line, but analysts say Chipotle has maxed out its order-processing capacity.
While the chain continues to grow, its stock price has declined 18% in the past 12 months. The shares took a hit when the company missed second-quarter same-store sales growth last year, and then saw another drop when hedge fund manager David Einhorn recommended selling it short.
Einhorn asserted that Chipotle was losing customers to Taco Bell, which Chipotle disputed, according to the Journal. But with many people still feeling pinched by the economy, Chipotle might risk losing some customers if its burritos seem more like an indulgence than a moderately priced meal.
More on Money Now
Isn't this the same Chipotle that was fined "mucho dinero" for hiring illegal workers?
I wouldn't mind if they go out of business, actually
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Economists find that as women grow more self-reliant, marriages become more about wanting commitment than needing it.
- Obamaphone program: Dialing for fraud?
- Lone Signal lets you tweet aliens for a fee
- Russell Brand swings at 'Morning Joe' -- and scores
- 7-Eleven targeted in human smuggling raid
- Why 'Dumb Ways to Die' became a viral hit
- Red Robin ad doesn't go down well with vegetarians
- Pity the millionaire: Mansions in short supply
- Bloomberg's new crusade: Food scraps
- China eyes stockings that shoo away perverts
[BRIEFING.COM] The major averages ended higher across the board as the S&P 500 advanced 0.8%.
Equities climbed steadily since the opening bell as investors prepared for tomorrow's policy decision from the Federal Reserve. Although chatter in recent weeks has included speculation the Fed would look to taper its asset purchases, today's broad gains suggest investors expect mostly reassuring words from Chairman Bernanke at tomorrow's press conference.
All ten sectors ended with ... More
More Market News
Here's a list of ways to profit from the potential move from defensive to cyclical stocks.