Chipotle Absorbs Tariffs to Preserve Value, Plans for Potential Adjustments
Chipotle Mexican Grill remains committed to providing guacamole without additional costs to customers amid the ongoing tariff situation. CFO Adam Rymer recently emphasized that the company is monitoring the fluid situation closely, with no immediate price increases planned.
Despite tariffs on Mexican and Chinese goods, Chipotle's focus is on patience and absorbing costs over time. If tariffs become permanent, the company may consider moderate price adjustments to offset expenses but maintain margins.
Chipotle's dependence on Mexican imports is minimal, with less than 2% of its cost of sales sourced from the region. However, the company has strategically diversified its avocado supply chain across multiple countries.
Analysts note potential risks from avocado exposure, which accounts for a portion of Chipotle's costs. Rymer highlighted the company's dedication to diversifying sourcing over time.
If tariffs are not implemented, food margins for 2025 are expected to improve, according to industry projections. In 2024, Chipotle faced challenges with rising avocado prices and portion size adjustments.
Chipotle's Q4 and full-year results met expectations, with same-store sales growth of 5.4% and 7.4%, respectively. Value remains a key strategy, with the company offering price discounts compared to competitors.
BTIG analyst Peter Saleh projects that 2025 same-store sales could benefit from prior price adjustments if no further increases are implemented.
Chipotle's prudent approach to pricing ensures its value proposition remains strong while navigating the tariff landscape. The company's focus on diversification and cost absorption provides flexibility to adapt to potential changes in the future.