Chipotle Mexican Grill on Tuesday reported a 9-percent increase in net profit despite a hit taken by the company’s failed investment in the soul food concept that was dubbed “America’s Next Great Restaurant.”
For the quarter ended June 30, Chipotle reported a net income of $50.7 million, or $1.59 per share, compared with $46.5 million, or $1.46 per share, in the same quarter a year ago.
The results disappointed analysts who had projected earnings of about $1.68 per share during the quarter, according to Thomson Reuters.
Comparable-restaurant sales rose 10 percent on revenues of $571.6 million, a 22.4-percent increase from the year-ago quarter’s revenues of $466.8 million, despite rising food costs.
During the quarter, however, Chipotle took a pre-tax charge of $2.4 million, or 5 cents per share, related to a loss on the investment in ANGR Holdings LLC, operator of the now-defunct Soul Daddy restaurant chain that won the reality show competition “America’s Next Great Restaurant.”
Steve Ells, Chipotle’s founder and co-chief executive, served as an investor/judge on the show in which entrepreneurs competed to develop a chain restaurant concept.
The winner, healthy soul food concept Soul Daddy, opened in three cities in May, but all three locations were closed by the end of June.
Chipotle said it also suffered higher legal costs during the quarter.
The chain is the target of a federal investigation into hiring practices after immigration officials questioned the validity of employees’ documents required to prove eligibility to work in the United States.
During the quarter, the fast-casual burrito chain opened 39 restaurants, bringing the chain’s total to 1,131.
Ells, in a statement, said, “We are continuing to focus on our efforts to serve better tasting food, made with ingredients from more sustainable sources, and on building a people culture that delights our customers and allows us to develop the future leaders we will need to support our growth.
“In spite of some cost challenges during the quarter, we continue to believe that our relentless focus on these things, which really drive our business, will allow us to produce great results for our shareholders over the long term,” he said.
For the first half of the year, revenue was up by 23.3 percent to $1.08 billion, which included an 11.1-percent increase in same-store sales that company officials credited to improved traffic.
For the year, the company upgraded its outlook.
Chipotle expects to open 135 to 145 restaurants with comparable sales reaching high-single-digit to low-double-digit increases.
At the end of the first quarter, company officials projected more modest mid-single-digit same-store sales growth.