What Happened?
Shares of mexican fast-food chain Chipotle (NYSE: CMG) fell 13.6% in the afternoon session after the company reported disappointing second-quarter results and cut its full-year sales forecast, citing a challenging consumer environment. The fast-casual chain’s comparable-restaurant sales fell by 4% in the second quarter, a steeper decline than analysts had anticipated. This drop was primarily driven by a 4.9% decrease in customer transactions, indicating fewer people visited its stores. While total revenue rose 3% to $3.1 billion, it fell slightly short of Wall Street estimates. The most significant concern for investors was the company's revised outlook. Chipotle now projected its full-year comparable sales to be “approximately flat,” a sharp downgrade from its previous forecast of “low-single-digit” growth. Management attributed the weaker performance and outlook to ongoing volatility in consumer spending.
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What Is The Market Telling Us
Chipotle’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. Moves this big are rare for Chipotle and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 17 days ago when the stock dropped 3.4% on the news that the major indices pulled back (Nasdaq -0.8%, S&P 500 -0.77%), largely due to escalating concerns surrounding the July 9th deadline for new US tariffs, now amplified by specific announcements. Earlier in the day, President Trump confirmed that Japan and South Korea would face new 25% tariffs on their imports to the US, effective August 1st. These announcements came ahead of the broader July 9th expiration of a 90-day pause on reciprocal tariffs, which failed to produce comprehensive trade deals with most nations. This action against two major trading partners, coupled with the ongoing threat of further tariffs on countries associated with the BRICS bloc, injected significant uncertainty and apprehension into global markets. Investors were likely reacting to the increased costs for businesses, potential disruptions to global supply chains, and the broader implications for international trade relations.
Chipotle is down 24% since the beginning of the year, and at $45.52 per share, it is trading 31.2% below its 52-week high of $66.16 from December 2024. Investors who bought $1,000 worth of Chipotle’s shares 5 years ago would now be looking at an investment worth $2,013.
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