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Chipotle sales surge, but not enough for Wall Street

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POSTED February 3, 2015 7:19 p.m.

DENVER (AP) — Chipotle’s sales surged in the fourth quarter as customers continued flocking to its restaurants, but the growth wasn’t as fast as Wall Street expected and its stock fell in extended trading.

The Mexican food chain said Tuesday that sales jumped 16.1 percent at established locations in the final three months of last year, boosted by price increases and more customer visits. The metric is a key gauge of financial health because it strips out the volatility of newly opened and closed locations.

Total revenue rose 27 percent, but analysts were looking for more.

Steve Ells, Chipotle’s co-CEO, said its customer loyalty shows the company changing the way people think about fast food. But he also noted that its success has prompted a “growing number of concepts imitating Chipotle.”

Looking ahead to 2015, Chipotle stood by its forecast for sales growth at established locations to slow to low- to mid-single digits. That follows a 16.8 percent increase for 2014.

To offset rising beef costs, the company also said it will consider raising prices for steak and barbacoa toppings around the middle of the year.

For many, Chipotle’s surging popularity is emblematic of the changing fast-food industry. Its customers like that they can walk down a line and say exactly what they want on their bowls and burritos. That ability to easily assemble orders to taste is in contrast to places like McDonald’s or Burger King, where people have to make special requests to hold the ketchup or for onions on their burgers.

“We believe this is the new fast-food model,” Ells during the call.

Chipotle also burnishes its image by touting the quality of its ingredients, and its “food with integrity” slogan helps draw a distinction between itself and the junk food reputations of traditional fast-food chains. Last month, for instance, Chipotle said it stopped serving pork at about a third of its restaurants after a supplier violated its animal welfare standards.

Ells said the response to the company’s decision has been positive, with people “thanking us for standing on principle.”

Meanwhile, the shifting expectations around food have hurt McDonald’s, which is fighting to hold on to customers. McDonald’s remains far bigger with more than 14,000 U.S. locations — Chipotle has nearly 1,800 — but it’s facing competition from a slew of smaller rivals that are touting the quality of their ingredients.

McDonald’s guest counts at established U.S. restaurants have declined for the past two years.

For the quarter, Chipotle earned $3.84 per share. That topped the $3.79 per share analysts expected, according to FactSet. Sales came to $1.07 billion, slightly short of the $1.08 billion analysts forecast.

The stock slid 6 percent to $686.83 in after-hours trading. The shares have gained 34 percent over the past 12 months.

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