J.P. Morgan analyst John Ivankoe has reiterated a Neutral rating on the shares of Chipotle Mexican Grill IncCMGwith a price target of $1,600.
At the investor meetings hosted at the company’s headquarters, conversations centered around pricing, with the company stating there is “no real resistance to pricing” but few trends suggest some pressure, said the analyst.
The brand sees itself priced 10-40% below equivalent competitors for non-delivery sales.
The sub-$75k household income spending group (~52% of American households, but relatively less for Chipotle) remains slower.
The brand sees less trade down from casual dining than before, probably as a function of the reduced relative size of this sector, the analyst noted.
Some, perhaps out of sync comments were made, such as “the consumer is definitely worried” with “right now the consumer is still in the spending mood/mode,” the analyst added.
One consumer survey cited by the company said 37% of consumers say they are spending more, 52% spending the same, and 11% spending less at the brand with trade down both to food-at-home and QSR.
The analyst models 4Q22 comparable sales of 7.5% vs the mid-high single digit guide versus the mid-single digit comp trend early in quarter as brisket was being lapped with improvement expected as Guajillo Steak remains for the entire quarter.
The analyst said the meeting highlighted a more technology/equipment driven optimism in the medium/long-term was tempered but what will be a lingering consumer softness and less-than-optimal in-store execution in the short-term.
A fairly common refrain the analyst also heard is the relative inexperience of store level staff, and their resulting lack of knowledge of the expected “Chipotle standard of excellence.”
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