By Deborah Mary Sophia and Hilary Russ
(Reuters) -Chipotle Mexican Grill Inc on Tuesday beat Wall Street estimates for quarterly profits, as multiple rounds of price hikes helped the burrito chain cushion the blow from soaring costs.
Shares of the California-based company jumped more than 8% in extended trading as it also said restaurant margins improved to 25.2% in the second quarter from 24.5% a year earlier.
It expects same-store sales to rise in the mid- to high-single digits in the third quarter, while analysts on average predict a 7.1% gain, according to Refinitiv IBES.
“Our pricing power is strong and the brand is resilient,” Chief Executive Officer Brian Niccol said during a call with investors.
Chipotle has been launching new menu items such as the limited-time Mexican chicken dish pollo asado in a bid to boost demand.
The company has also been doubling down on its digital business through its order-ahead drive-thru “Chipotlanes”.
With higher costs biting into profits in the restaurant industry, Chipotle, like peers McDonald’s Corp and Starbucks Corp, has hiked prices several times over the past few months.
Chipotle’s menu prices rose over 4% in the quarter but were outstripped by higher costs for avocados, tortillas, dairy and beef.
The company has been looking to automate its kitchen operations to shave costs and is even testing a robot called “Chippy” to help cook tortilla chips.
The price hikes helped Chipotle’s net income jump to $259.9 million, or $9.25 per share, in the second quarter ended June 30, from $188 million, or $6.60 per share, a year earlier.
Excluding items, Chipotle earned $9.30 per share, topping estimates of $9.04.
(Reporting by Deborah Sophia in Bengaluru and Hilary Russ in New York; Editing by Devika Syamnath and Richard Pullin)
