Chipotle plans first price hike in 3 years

Chipotle announced it will raise its prices for the first time in three years, by 5 percent.

The higher prices come in response to an increase in beef, avocado and cheese prices. The increase equates to roughly 25-50 cents on each $8 burrito bowl and will take effect in July.

The decision comes as higher food costs have pressured profit margins for the chain. Steak prices are up 15 percent this year, marking the highest level Chipotle has seen since it was founded in 1993. Cheese prices are also expected to be up over 10 percent this year, and avocado costs will also continue to rise.

"It has been nearly three years since our last company-wide price increase, and while we want to remain accessible to our customers, we are at a point where we need to pass along these rapidly rising food costs," CFO Jack Hartung said on a conference call with analysts.

Chipotle is optimistic that the price increase won't deter customers from visiting the chain.

"Customers will continue to see Chipotle as a great value and continue to be willing to spend a little bit more money—and it really is just a little bit more money," Hartung added.

Hartung could have a valid point. While chains like McDonald's (NYSE:MCD) saw drops in sales due to winter weather, Chipotle's through-put—a measure of how many customers come throught the store—increased during peak lunch and dinner periods last quarter. The Denver-based food chain, with about 1,500 locations nationwide, reported its first-quarter earnings rose 8.5 percent, though food costs were up 33 percent from last year.

The company also said that its health-conscious menu appeals to a growing population of U.S. diners and that it is adding more menu options this year. Sofritas, the restaurant's new tofu option, will hit all of its markets by the end of the year.

For more
-See this Chipotle press release
-See this Chipotle earnings call transcript

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