By Heather Haddon and Nicholas G. Miller

Consumer malaise has come for the burrito.

Chipotle Mexican Grill on Wednesday reported a same-store sales decline of 4% for its most recent quarter, the largest quarterly drop since Covid-19 dealt a blow to the restaurant industry in 2020. The decrease was bigger than analysts expected, according to FactSet.

"It was probably the worst aggregate storm we could have faced," Chief Executive Scott Boatwright said on an investor call. Declining consumer confidence, plus tough comparisons to strong sales last year, played into it, he said.

The California-based chain's shares tumbled 9% in aftermarket trading. While Chipotle's overall revenue increased for the three months ended June 30, its profit declined.

Chipotle is one of the first restaurant chains to report second-quarter earnings in what is expected to be an uneven period for food-service companies. Sales for some chains, such as Domino's Pizza, have begun to improve after declining earlier this year. But restaurant traffic overall remains down from last year, as inflation-weary consumers have pulled back on eating out.

Until this year, Chipotle sales had largely been resilient, its regulars tending to have more disposable income than many fast-food chains. The company said in April, however, that its customers had started tightening up as well.

Boatwright, who took over as Chipotle's CEO last fall after longtime chief Brian Niccol departed for Starbucks, said sales improved in June and July as the company did more marketing and added to its menu.

Still, executives said the consumer outlook remains volatile. Chipotle on Wednesday lowered its same-store sales expectations, projecting little change from last year. The chain previously had forecast a slight increase.

Boatwright said the company is rethinking how to better highlight its value given consumers' ebbing confidence, particularly lower-income diners. Chipotle's typical chicken bowl or burrito costs around $10, less than most fast-casual rivals and many fast-food restaurants, the company said.

Chipotle said it continues to anticipate that U.S. tariffs will increase its costs of sales by around 0.5% this year. Chipotle has taken measures to diversify where it gets its avocados and other produce, but still needs to import many of the goods central to its menu.

The company anticipates it will keep its price increases muted this year as long as tariffs don't rise more than currently projected. Chipotle is negotiating with its vendors to try to take some of the sting off its import costs, chief financial officer Adam Rymer said.

For the quarter, the fast-casual chain reported $436.1 million in quarterly net income, or 32 cents a share, down from $455.7 million, or 33 cents a share, a year earlier. Adjusted earnings were 33 cents a share, matching analysts' expectations.

Chipotle generated $3.06 billion in revenue, up from $2.97 billion the year prior. Analysts were expecting revenue of $3.11 billion.

Revenue was boosted by new restaurant openings, with 3,839 company-owned restaurants at the end of the quarter, up from 3,530 the previous year.

Write to Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

July 23, 2025 18:29 ET (22:29 GMT)

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