By Evie Liu

Chipotle Mexican Grill posted much slower revenue and earnings growth for the first quarter of 2025 as inflation and recession fears threaten to discourage consumers from eating at restaurants.

Still, the numbers came in higher than Wall Street expectations. The stock gained 3.6% on Wednesday ahead of the earnings report and 4.4% in after-hours trading.

For the first three months of 2025, the fast-casual restaurant chain saw its revenue grow 6.4% from a year ago to $2.9 billion, missing analyst expectations of $2.95 billion. Earnings increased 7.4% to 29 cents per share, higher than the 28 cents expected.

Those figures look weak compared with the 24% earnings growth and 15% sales growth across the four quarters in 2024. Same-store sales declined 0.4% year-over-year in the first quarter of 2025, a sharp drop in contrast to the 7.4% growth for full-year 2024.

The first quarter results were impacted by several headwinds including weather and a slowdown in consumer spending, said CEO Scott Boatwright in a statement.

The restaurant sector overall has been under pressure as consumers dine out less amid persistent inflation. Chipotle has been performing better than peers, thanks to its loyal customer base that prefers convenient meals with fresh ingredients at a reasonable price.

Still, investors have become increasingly worried this year that policies from the Trump administration, such as tariffs, could drive the U.S. economy into a recession. That could affect even fast-growing restaurant chains like Chipotle.

The concerns are reflected in not only earnings estimates, but also share prices. Chipotle stock has tumbled 22% in 2025, and is now trading at 35 times expected earnings for the next 12 months. While that's still higher than many peers, the stock's valuation is at its lowest since 2023.

Most Wall Street analysts seem to believe the stock is oversold. Three quarters of analysts polled by FactSet have a Buy rating for the stock, with an average price target of $62. That's 33% higher than the stock's current level.

Chipotle currently operates over 3,700 restaurants and plans to open between 315 and 345 new stores this year. The majority of Chipotle's restaurants are in the U.S., but the burrito chain has been working to expand to overseas markets.

In 2023, the chain reached its first international development agreement to open restaurants in the Middle East. This week, Chipotle announced plans to open a restaurant in Mexican City by early 2026 and that it's looking to expand into other Latin American markets.

Chipotle's earnings report comes as the Trump administration threatens to impose tariffs on trade partners like Mexico, which could lead to rising prices of imported avocados from the country. The levies are currently under exemption as the two countries continue to negotiate.

Chipotle said it has been diversifying its avocado suppliers away from Mexico, and therefore won't see a big impact from the tariffs. The company has said that it would likely absorb the rising costs for now and won't raise the price of guacamole, whose main ingredient is avocado.

Write to Evie Liu at evie.liu@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 23, 2025 16:21 ET (20:21 GMT)

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