(Bloomberg) -- Chipotle Mexican Grill Inc. sank in late trading after profitability and a key measure of sales fell short of Wall Street's expectations, showing that stubbornly high inflation is having an impact on the burrito chain's operations. The shares fell in late trading.
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Restaurant margin was 24% in the fourth quarter, below analysts' average estimate of 25.1%, with executives citing elevated costs for tortillas, dairy, beans and rice in the period. Higher menu prices, which are up about 10% from a year earlier, helped to offset some of the impact, but customer transactions fell.
Chief Financial Officer Jack Hartung said that higher-than-expected redemptions in the company's loyalty program, along with a rise in medical claims and sick pay, reduced restaurant margin in the period. The burrito chain sees labor shortages and delays related to construction and raw materials this year - but the inflation outlook is better than a year ago.
"We think inflation will be reasonably tame. Hopefully that will come true," Hartung said. He added that Chipotle doesn't have price hikes planned for now and it may be more patient with menu price increases this year. He predicted the company could reach a level of around 25% for restaurant margin over the longer term.
Comparable sales - a key measure of restaurant momentum - rose 5.6% in the fourth quarter, below the estimate of 7% growth compiled by Bloomberg. Executives said that the chain's garlic guajillo steak menu item, which was among the pricier items on the menu, sold less than expected.
The results show how high inflation is crimping consumer demand for discretionary items such as restaurant meals. In such an environment, sales gains are driven by higher menu prices instead of more orders. Restaurant peers have reported a similar trend in recent quarters.
Chipotle remains focused on opening new stores and recruiting and retaining workers amid "a challenging and fluid macro environment," Chief Executive Officer Brian Niccol said in the company's earnings statement. Chipotle opened 100 new locations in the fourth quarter, with 90 having drive-thrus. The company is targeting 7,000 locations in the long term, up from almost 3,200 today.
Chipotle's shares fell 4.8% in extended trading at 6:08 p.m. New York time. The stock has risen 24% so far this year through Tuesday's close.
(Updates shares and adds details from investor call)
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