Chipotle's Steak Burrito With Cheese And Guacamole Is Putting The Squeeze On Profit Margins

Chipotle Mexican Grill just announced that its Q1 sales beat expectations. But food inflation is pressuring profit margins.

“Food costs were 34.5% of revenue, an increase of 150 basis points driven by higher commodity costs,” said management. “Higher commodity costs were primarily driven by inflationary pressures in beef, avocados, and cheese prices.”

Earnings per share climbed 7.8% to $US2.64, which was below expectations of $US2.87.

Still, customers continue to head to Chipotle in droves.

Comparable store sales jumped 13.4%, beating expectations for 8.8% growth.

“We are delighted that more and more people are choosing to visit our restaurants every day allowing us to deliver double digit comps during the quarter,” said co-CEO Steve Ells. “We are confident that our special food culture will continue to attract more customers to visit Chipotle as customers better understand and connect how natural and high quality ingredients that are freshly prepared result in better tasting food.”

Management forecasts high single digit comparable store sales growth for the year.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at research.businessinsider.com.au.