(Updates with CFO’s comments in fourth paragraph.)
Oct. 20 (Bloomberg) -- Chipotle Mexican Grill Inc., the best-performing restaurant stock in the Standard & Poor’s 500 Index this year, reported a 25 percent gain in third-quarter profit as traffic and prices increased.
Net income rose to $60.4 million, or $1.90 a share, from $48.2 million, or $1.52, a year earlier, the Denver-based company said in a statement today. The average of 23 analysts’ estimates compiled by Bloomberg was $1.85.
Co-Chief Executive Officers Steve Ells and Montgomery Moran have sought to appeal to health-conscious consumers by promoting naturally raised and hormone-free meat through Chipotle’s Food With Integrity program. Earlier this year, the company raised menu prices 4.5 percent at 80 percent of its stores to help recoup higher ingredient costs.
The chain saw higher prices for chicken, beef, cheese and sour cream during the quarter, Chief Financial Officer John Hartung said in a conference call today. Chipotle expects food inflation to continue into 2012 and is “in a position” to raise prices further if necessary, he said.
Chipotle rose 3.6 percent to $319 at 5:52 p.m. in New York in extended trading. Earlier, the shares closed down 0.8 percent to $307.91, for a gain of 45 percent this year.
Food costs in the quarter rose to 33.1 percent of sales, a 2.5 percentage-point increase, as commodity prices climbed, Chipotle said in the statement. Restaurant operating margin narrowed to 26.7 percent from 27.7 percent a year earlier.
“They do have some pricing power,” Andy Cross, chief investment officer at the Motley Fool in Alexandria, Virginia, said before the release. Chipotle has a loyal following that is willing to pay more for the chain’s food, he said.
Sales at stores open at least 13 months rose 11.3 percent in the quarter. Analysts were expecting a 9.6 percent increase. Same-store sales are considered a key measure of a retailer’s growth because they exclude gains from newer locations.
Chipotle has more than 1,100 restaurants, mostly in the U.S. It has locations in London and Toronto and plans to open its first store in Paris during the current quarter.
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