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Chipotle (CMG -17%) is sharply lower after posting Q3 results that fell flat on nearly every front. The fast-casual chain reported in-line EPS and revenue, but same-store sales (comps) were disappointing, and the company cut FY25 comp guidance for the second consecutive quarter—to low-single digits from flat. The latest reduction underscores a difficult stretch for CMG, which saw comps soar +7.4% in 2024 but has since struggled to sustain momentum.

It's been nearly a year since Scott Boatwright took over as CEO in November 2024, succeeding Brian Niccol (now CEO of Starbucks), and investors are beginning to question the brand's direction.

• Q3 comps rose just +0.3%, marking a modest rebound from -4.0% in Q2, but the full-year guidance cut implies a likely weak Q4 ahead.
• CMG cited consumer headwinds across income segments, with low- to middle-income guests (households under $100K, ~40% of sales) showing the sharpest pullback.
• The 25-35 age group—a key demographic for CMG—is particularly pressured by unemployment, resumed student loan payments, and weak wage growth, leading to lower visit frequency.
• Management noted the promotional environment has intensified, with competitors emphasizing value offerings—something CMG refuses to pursue, maintaining that "value as a price point is not and will not be a Chipotle strategy."

Chipotle's brand strength and food quality remain intact, but its premium pricing strategy appears out of sync with current consumer trends. Without a value tier or innovative pricing tactics—such as smaller portions or bundled deals—recovery may remain elusive.

Briefing.com Analyst Insight:

Chipotle's once-sizzling growth story has cooled significantly, and management's reluctance to adapt its pricing or menu strategy could prolong the slump. With comps barely positive and consumer pressure mounting, CMG's premium-only approach looks increasingly risky. We think the company needs to re-engage value-conscious customers through creativity rather than price hikes. The lack of urgency from management is concerning, particularly given the demographic challenges of its core audience. CMG remains a best-in-class brand operationally, but near-term growth visibility is cloudy at best.