Chipotle Q2 2026: Sales Beat and Raised Guidance, but a Salmonella Scare Hits the Stock

In the last quarter of 2021, revenue increased 9.3% and totaled $3,35 billion, which was a slight positive surprise from the expected $3,33 billion. Chipotle's same store sales (restaurants with 1 year of business) increased by 2.2%, 1.0% was attributable to an increase in the average sale and 1.2% was attributable to an increase in profit per sale. The average sale is the more important metric. For much of 2021, Chipotle recorded negative numbers for customer visits. Therefore, positive transactions signify the changes in marketing and offerings have been successful. Revenue from digital orders increased to 38.3% from 35.5% the year prior. Adjusted earnings were $0.33 per share and $0.32 in estimated earnings with reported earnings equaling $0.32 and remaining flat from the previous year.

Profitability was the most concerning element of the report. Restaurant-level operating margin dropped to 25.2% (from 27.4% the previous year) by -2.2 percentage points. Beef and freight increased food, beverage, and packaging to 29.7% of sales. Lower costs in avocado and dairy offset these increases. Labor costs increased to approximately 25.0% of sales, and the company’s operating margin dropped to 15.7% (from 18.2% the prior year). The net income decreased to $403.5 million from the prior year’s $436.1 million, but the decrease was offset by no change in earnings per share at $0.32, as the company had fewer shares outstanding post stock buyback. Essentially, Chipotle increased food sales and kept less of every dollar.

The most positive element of the report was Chipotle’s improved targets. The company predicted low-single-digit sales growth for the year (after previously predicting no sales growth). This is what caused the initial +12% movement, as it shows management believes the recovery of sales is not complete. Opening 350 to 370 new restaurants for the year will remain company goals, as will the opening of 10 to 15 additional restaurants with international partners. It is projected that approximately 80% of the newly opened company stores will include Chipotlane. Of the 100 newly opened company stores, 80 included Chipotlane.

There are two issues affecting Chipotle stock, and they are distinct. The first is related to cyclospora, a parasite linked to a broader outbreak that caused some diners to lose appetite in late July. Chipotle estimated that this incident impacted sales by about 2 percentage points in the second half of the month. While Chipotle said the sales problems were not caused by their restaurants, they built this estimate into their sales outlook. The other, newer, and more direct problem, occurred on August 4 when the Minnesota Department of Health linked an outbreak of salmonella to jalapeños used at several Chipotle locations.

Chipotle removed the jalapeños from all of its stores. The stock dropped 10% on a single day’s trading. The trade volume for that day erased trading profits from the earnings report. How quickly Chipotle addresses this problem, and how they work to restore customer confidence, will likely shape how the market looks at Chipotle stock over the coming weeks.

Chipotle Memorializes another tough year with stock drops of approximately 30% in the last 12 months and 50% below peak post-Brian Niccol resignation and sluggish sales. Chipotle management buys stock at a lower cost with the current average of 29-33x earnings, in contrast to the higher earnings tracking multiple historically.

Chipotle Price Chart - Source: Tradingview

Buybacks of approximately $631 million at an average of $32.55 per share in the last quarter, $1.3 billion stock buyback authorization, and approximately $1.7 billion capacity are initiatives management is implementing. In 2022, management spent approximately $2.4 billion on buybacks at an average price of $42.54; that price currently stands well below the target. With the goal of reaching 7,000 U.S. Locations from currently 4,000, the focus remains long-term. Currently, analyst price targets are in the low- to mid- $40s, well above the current price.

Key Levels

• Resistance:  $35.19 → $36.70 → $38.97
• Support:  $33.85 → $32.16 → $30.49 → $28.01
• 50 EMA:  $35.19 (the level buyers need to reclaim)
• 100 EMA:  near $33.85 (aligns with support and the rising trendline)
• RSI:  ~40, with bearish momentum easing after nearing oversold

Earnings were good, and the stock rallied about 12%post-July 29 report. The sell-off began August 4 when news of a salmonella outbreak in Minnesota tied to some Chipotle locations and their jalapeños was published. The food safety news caused the stock to fall back to the $34 region and was the main reason the stock fell from recent highs.

It depends on how risk averse you’re willing to be. Some positives are increased store traffic, upgraded guidance, lower than usual valuation, and share buybacks. However, the margins are being squeezed from increased both food and labor costs, and increased uncertainty is caused from the salmonella incident. Most analysts have put a buy rating on the stock with a low to mid target of $40s. The near term direction of the stock will be impacted by the resolution of the food safety issue.

From a two quarter evaluation, Chipotle has made significant improvements. Quarter two sales were up and quarter two traffic statements were positive leaving management cautiously optimistic for the full year. Unfortunately, quarter two dealt Chipotle another blow of negative earnings news from increased food and labor costs and the salmonella outbreak tied to jalapeños. The long term basis of Chipotle’s valuation is buy, but until food safety issues are resolved, the short term view is sell. The support of $33.85 would maintain the upward view of the stock, but dropping below that would support a view of $32.16.