Chipotle stock jumps on earnings beat, price hikes

Yahoo Finance reporter Allie Canal breaks down Chipotle's second-quarter earnings results.

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SEANA SMITH: Well, the earnings keep rolling in. Chipotle is now out with its results. Allie Canal is joining us here on set with those headlines. And, Allie, what do you see crossing?

ALLIE CANAL: So what is you crossing is a miss on revenue. Revenue coming in at $2.21 billion, versus the expected $2.25 billion. Now, earnings per share did beat, $9.30, versus the expected $9.10. Now, Chipotle said they expected US same-store sales to increase between 10% to 12%. They only hit 10.1%. So missing there. It seems like consumers are pulling back their spending amid inflation.

Some commentary from the earnings release. Brian Niccol, chairman and CEO at Chipotle, saying, quote, "We are pleased with our second quarter performance during a period of inflation and consumer uncertainty. Our pricing power and value proposition remain strong, as our culinary and food with integrity commitment continues to be a key point of differentiation."

Now, in-restaurant sales increased 35.9%, while digital sales represented 39% of food and beverage revenue. That's slightly below what we saw in the first quarter. But we know that Chipotle just continuing to rely on that digital demand as well as some alternative store formats, like the Chipotlane, which offers drive-thru and walk-up windows for digital order pickup.

So we'll see what happens on the earnings call. I think investors are going to want a little more clarity on the inflation picture if they had to do any more price increase. As we saw, 4% price increases on some of those menu items in the first quarter. It's likely that that had to occur, again, amid inflation. So that's going to be key for the earnings call later this afternoon.

DAVE BRIGGS: Good job, Allie. So, yeah, the CEO, Brian Niccol, suggested in the days ahead that they had plenty of pricing power. Is that what we've seen indicated in the numbers recently?

ALLIE CANAL: Yeah, indicated in the numbers and indicated in a lot of that third-party data as well. Foot traffic analytics platform placer.ia, they gave me some data that shows that foot traffic at Chipotle continues to see year over year and year over three-year foot traffic gains, even as nationwide visits to fast casual restaurants slow. Now, that being said, we saw McDonald's report earnings earlier today.

McDonald's saying that they're seeing consumers trade down to its Big Macs and McNuggets. So it seems like consumer preferences are adjusting to really keep up with what we're seeing with inflation. But again, just parsing through this earnings report, it looks like that the pricing power is what's driving the stock higher, as well as that beat on earnings. It's up about 8% in after hours trading.

RACHELLE AKUFFO: And that speaks to what we were saying about Coca-Cola earlier. People, at least for now, are still willing to spend on these-- on these consumer staples, especially Chipotle. Also focusing on some of their automated kitchens. They're trying to also expand into some plant-based products here. In terms of who's responding well to the consumer, I mean, obviously, Chipotle does seem to be doing a good job, Allie.

ALLIE CANAL: Yes. And again, really focusing on digital, focusing on those loyalty programs. Recently, they expanded that loyalty program into Canada. Chipotle CFO was on our program not too long ago. He said that that loyalty program, it really creates this one-on-one relationship. So we see that there's this synergy there between Chipotle and its customers. And for a while there, consumers really didn't mind the price increases. They wanted to get the products. They wanted to get the fresh ingredients.

Of course, we've seen Chipotle battle higher margins as price increases occur with products like avocados, beef, paper. But they seem to be still attracting that consumer. And again, even though we have a miss on that revenue, adjusted EPS climbing higher, slightly in line with the US same-store sales. A slight miss on those. But overall, it seems like investors, they aren't too concerned with any of that. I'm actually surprised that the stock is doing so well in after hours trading. We'll see if it goes down on that earnings call.

DAVE BRIGGS: I was just about to ask you that very question, so you read my mind. Up almost 8% after hours.

ALLIE CANAL: Yeah, I was surprised by this.

DAVE BRIGGS: Despite a miss on revenue, a beat on earnings per share. Interesting interpretation by TheStreet. Allie Canal, great stuff. Thank you so much.