Chipotle Mexican Grill (CMG)

This day coincided with the third quarter earnings announcement from Chipotle Mexican Grill. The past few years have been tough for this once loved purveyor of proteins and vegetables. A few solid years of unabating global inflation had caused input costs to soar which, in turn, means menu inflation followed. It was around this period that Chipotle faced increasing backlash online about their portion sizes— both in terms of their inconsistency as well as the fact customers felt they were being shortchanged. Was this tactful internal policy to save margins or an unfortunately-timed gradual decline in the enforcement of standards? Who’s to say.

The fact of the matter is that this earned Chipotle a lot of bad press. So much so, that press releases and advertising campaigns were spun up to console angry customers and assure them more attention would be given to serving beefy portion sizes once more. A recurring theme throughout earnings calls of 2024 and 2025 was the company’s progress on setting the portion problem straight.

What was so calamitous in this earnings call that caused such a sudden recoil from investors? Following successive negative comparable sales, Chipotle managed to squeeze out a 0.3% improvement on comparable sales in that quarter. Restaurant margins decline 100bps YoY falling to a, still high by industry standards, 24.5%. Talks of macroeconomic pressures, results failing to live up to analyst expectations, yada yada yada. The objective truth of the matter is that Chipotle was still choking down the inflation from the post-pandemic era and it’s influence on the, now more sensitive, consumer.

Chipotle continued the inflation party long after the economy began signalling it needed a break and this ultimately came back to haunt them in 2025. In financial markets it only takes a few bad quarters for a story to “fall apart”. The first two quarters saw consecutive bouts of negative comparable sales. Counter narratives started forming. Margins begin to slide and so too did the share price.

If there is one thing you can count on, its the high correlation relationship between falling share prices and headlines declaring the end times for said company. In a lot of cases, this is apt. In some cases, and this is where you are paid as an investor, its a simple case of narrative following price. In the case of Chipotle, it is my opinion that the challenges facing the company are temporal. Nature catching up with a company that overreached in price without an accompanying increase in quality. Nature eventually striking down those who traded on borrowed time. We’ve since seen Chipotle make a strong effort to bring value back to the menu with incredibly low priced, protein packed, offerings. Smaller tacos, protein bowls with 32g protein under $4. It’s not exactly my cup of tea, but it’s an obvious boon to the add-on business as well as something to satiate the cheapskates.

In my mind, it doesn’t take a lot to put Chipotle back on track. In my opinion it never really derailed, but in the eyes of the fickle analysts, it has. Chipotle has an incredibly efficient box-box scaling model, high margins that can take a punch or two, and a largely untapped global market outside of the United States, where more than 95% of their stores are located.

Following the intra-day dump of Chipotle on October 30th, I picked up shares for the price of $30 a piece. I find it laughable that commenters claim that Chipotle is finished. Like there is not a world outside of the borders of the U.S of A. I don’t expect much in the 2025 fiscal year results. Revenue will grow at a subdued rate. Margins will likely contract. Comparable sales are going to decline for the first time since 2016. Much of this was priced in the second it became apparent to the market, many months back.

As for 2026, I see it probable that an improvement on 2025 results will occur. From there, I think the narrative will eventually shift back to business as normal. Maybe next year, maybe the one after that. Maybe the crowds shouting “Slop” will get bored and move onto the next struggling industry, who knows. I don’t invest on two-year time horizons. I am not skilled, nor lucky enough to do so. I have heard that longer time horizons improves the odds of getting lucky. Lord help me. At $30 per share, I think much of the downside is accounted for.