Chipotle Plans to Absorb Tariffs, Maintain Value Proposition
Amidst ongoing tariff uncertainties, Chipotle Mexican Grill (CMG) plans to maintain its price stability, closely monitoring the situation. CFO Adam Rymer stated that the company is observing the fluid tariff landscape without making hasty price adjustments.
"We don't necessarily want to act quickly with price," Rymer said, emphasizing that near-term price hikes are not anticipated. "We're going to be very patient... to get an idea if these are going to be permanent."
Should the tariffs become permanent, Chipotle may consider price adjustments to offset costs, but not for margin expansion. The estimated impact on cost of sales is 60 basis points. Despite relying on Mexico for 2% of its cost of sales, Chipotle has diversified its supply, sourcing its signature avocados from multiple regions to reduce exposure.
"We're not completely dependent on one region," Rymer said. "We... continue to make sure that we're diversified."
If tariffs do not materialize, Bank of America predicts improved food margins for 2025. In 2024, Chipotle faced challenges with higher avocado prices and portion size adjustments.
Despite issuing conservative same-store sales growth guidance for 2025, Chipotle continues to prioritize value. Its average 30% discount on food compared to peers has driven market share gains. A recent 2% price increase was carefully implemented to maintain its value proposition.
BTIG analyst Peter Saleh projects a 200 basis point benefit to same-store sales in 2025 if no additional price hikes are implemented.