Have investors learned nothing from the past? Last July, Chipotle Mexican Grill, Inc. (NYSE:CMG) was sailing along at about $400 a share until they reported earnings. When the company announced low single-digit same-store sales growth, the stock plunged to under $300 a share. Investors have been given a few earnings reports since then, and since the end of October 2012 the stock has been on a tear once again. The problem is, it seems like everyone forgot that growth is slowing down at this company. Is another correction coming, or did the company tip off shareholders that better times are ahead?
A Rough Start
The first three months of this year were difficult for most restaurants. With major storms and torrential rains, customers don’t go out to eat as much. A few of Chipotle Mexican Grill, Inc. (NYSE:CMG)’s competitors like Panera Bread Co (NASDAQ:PNRA), Buffalo Wild Wings (NASDAQ:BWLD), and Yum! Brands, Inc. (NYSE:YUM), specifically cited the weather as a factor affecting their sales.
Panera Bread Co (NASDAQ:PNRA) said their same-store sales increase of 3.3% might have been up as much as 4.8% without weather issues. Buffalo Wild Wings reported same-store sales up 1.4% and suggested weather had an impact. Of course, Yum! Brands, Inc. (NYSE:YUM) is dealing with a separate problem of slowing sales in China, but the negative weather affect didn’t help their domestic results. Chipotle Mexican Grill, Inc. (NYSE:CMG) suffered along with their peers, and reported just a 1% increase in same-store sales.
The issue of same-store sales growth is my first concern about Chipotle at the current time. The company was routinely reporting significant same-store sales growth prior to the middle of last year. However, since these price increases stopped, Chipotle’s same-store sales have increased 4.8%, 3.8%, and 1%, in successive quarters.
Great Expectations…Or Not So Great, As The Case May Be
Peter Lynch said that one of the best gauges of a restaurant is their same-store sales. It’s one thing to compare same-store sales for one period, but what about the company’s expectations for the whole year?
Sorry Chipotle Mexican Grill, Inc. (NYSE:CMG) fans, the company isn’t saying anything different than before about same-store sales. Both Panera Bread Co (NASDAQ:PNRA) and Buffalo Wild Wings (NASDAQ:BWLD) are calling for better same-store sales growth than the burrito roller. Of their peers, only Yum! Brands, Inc. (NYSE:YUM) is struggling worse, and that’s because of their issues in China.
Last year, the company began to predict low single-digit same-store sales growth. Investors didn’t listen last July when this first happened, and the stock got crushed. Today, the company is calling for low single-digit same-store sales growth, and investors seem to be turning a deaf ear again. Compared to expectations from Panera Bread Co (NASDAQ:PNRA) of 4% to 5% same-store sales growth, and “mid-single digit” same-store sales growth at Buffalo Wild Wings (NASDAQ:BWLD), Chipotle’s forecast looks a little worrisome.