Chipotle cuts annual sales target as dining out slows; shares drop

By Juveria Tabassum

July 23 (Reuters) - Chipotle Mexican Grill CMG.N on Wednesday lowered its annual sales growth target again and missed quarterly sales estimates as economic uncertainty prompts Americans to dine out less, sending the burrito chain's shares down 9.7% after hours.

A significant rise in menu prices has pressured dining out in the United States for several quarters now and consumers are preparing meals at home to stretch their budgets.

"There are certain cohorts of the consumer, definitely on the lower-income side, that are feeling pressure right now. That's something that we'll have to take into consideration when looking at price going forward," CFO Adam Rymer told Reuters in an interview.

Companies are also taking stock of President Donald Trump's tariff policy that could lead to higher supply chain costs and further pressure consumer spending.

Chipotle now expects annual comparable restaurant sales to be about flat year-over-year, while its prior target was for growth in the low single-digit range.

Consumers are also trading down to cheaper entrees such as chicken from beef in some cases, executives said on a post-earnings call, and the company saw some market share loss from April through May.

Chipotle's visits per location fell about 6% in the second quarter, while the wider fast-casual segment remained flat, data from Placer.ai showed.

The company has opened more stores betting on its affordable and popular Tex-Mex cuisine to help protect against the broader weakness in dining out.

It also ramped up digital marketing and promotions through its rewards program to keep consumers interested, and that supported sales growth in June, executives said.

Chipotle launched the Adobo Ranch, its first new dip in five years, during the quarter and continued its limited-time Chipotle Honey Chicken offering to boost sales.

It reported a 4% fall in comparable sales for the quarter ended June 30, while analysts were estimating a 2.86% decline, per data compiled by LSEG. Its adjusted earnings per share were in line with estimates.