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Chipotle on Tuesday reported first-quarter sales that topped Wall Street’s expectations, as visits to its restaurants improved even while it cut back on promotions.
Sales at restaurants open for at least one year turned positive for the first time since Q4 2015, when outbreaks of E. coli were linked to Chipotle’s food in 14 states.
The Mexican fast-casual restaurant chain said it earned $1.60 per share, turning a profit after incurring a loss in the same quarter a year ago.
Revenue totaled $1.07 billion.
Analysts had forecast Chipotle would report adjusted earnings per share of $1.29 on revenue of $1.05 billion, according to Bloomberg.
Same-store sales at restaurants open for at least one year rose 17.8% year-on-year (15.5% forecast) after a 29.7% drop a year earlier.
Chipotle hired food-safety experts to scrutinize its practices after the E. coli saga. Food costs fell 150 basis points, or 1.5%, to 33.8% of revenue partly because lettuce and bell peppers were no longer prepared offsite, Chipotle said. Had avocado prices not recently surged to a record high, food costs would have been even lower.
The company maintained its guidance for the year and said it expected same-store sales to be in the high single digits.
Chipotle confirmed last week that it raised prices by about 5% in about 20% of its locations. It had hinted the hikes were coming.
Some analysts have raised questions about whether Chipotle’s stock is overvalued after a 25% surge since the start of the year. According to Morgan Stanley and Oppenheimer, the company will need to achieve EPS of at least $20 over the next three years to justify the current price, although they see that as unlikely.
As the shares rose this year, bets against Chipotle also climbed. Short interest has risen $296 million this year, according to the financial-analytics firm S3 Partners. The current short interest total of $2.2 billion represents about 16% of shares outstanding.
Shares of Chipotle rose by as much as 6% in after-hours trading.