Shares of several fast-food, restaurant, and coffee chains are showing heavy selling in the opening session on Friday pressured by comments from Chipotle Mexican Grill, Inc.(NYSE:CMG), which has been experiencing lower traffic in its restaurant due to poor economic condition globally. Although the company posted solid profit and revenue for the second quarter, the company’s sales number and comparable sales failed to meet analysts’ target.
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The company reported earnings of $81.7 million, or $2.56 a share, up from a year ago profit of $50.7 million, or $1.59 a share. Revenue during the quarter surged 21% year over year to $690.9 million, maintaining its consistent growth rate of 20%. Analysts were estimating the company to earn $2.30 a share on revenue of $707 million.
However, same store sales growth came in at 8%, which is quite lower from its past performance where it showed double digit gains. Moreover, the recent quarter’s earnings were mainly driven by an increase in menu prices recently.
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"We're seeing a slowdown. I mean there is no other way around it. We were humming along nicely in the first quarter. We were humming along nicely in April, and then we saw a slowdown," Chief Financial Officer Jack Hartung said on a conference call.
While Chipotle's customer traffic is still increasing year-over-year, it isn't rising at the high rate of quarters past. He attributes the slowdown to the tough comparison over last year's growth, as well as a general decline in consumer spending and ramped up advertising by other restaurants. "It's possible that maybe that's causing people to visit other restaurants. But we just don't know," Mr. Hartung said.
Shares of CMG tumbled 22.56% to $312.76 on heavy volume.
Shares of other companies within the sector took a hard knock as well including:-
Starbucks Corporation(NASDAQ:SBUX) 51.94 -2.26 (-4.17%), Whole Foods Market, Inc.(NASDAQ:WFM) was down -5.64 (-6.23%) to $84.90, Dunkin Brands Group Inc(NASDAQ:DNKN) lost 1.46 (-4.20%) to $33.20 and Yum! Brands, Inc.(NYSE:YUM) slid 3%.