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Chipotle's Growth Dented By Carnitas Shortage

The chain's stores are still ringing up higher sales, just not at the rates it saw last year.

Posted on July 21, 2015, at 6:15 p.m. ET

After a hot 2014, Chipotle's rapid pace of growth is starting to come down to earth. The recent carnitas shortage didn't help.

From April to June, sales at restaurants open for at least 13 months increased 4.3%, which is notably below the 10.4% jump earlier this year and the 16.8% for all of 2014.

The relatively modest gain last quarter was attributable mainly to price increases, with some impact from increased catering, sides and kids meals orders. Guest counts were actually down slightly during the period, but started to tick up again in July, according to the company.

Chipotle had expected same-store sales growth to slow from last year's soaring levels, and things are playing out as the company expected, said chief financial officer Jack Hartung on an earnings call on Tuesday.


Among Chipotle's challenges this year was the shortage of carnitas. The chain stopped serving the pork in some of its restaurants when it couldn't secure enough supply that met its animal welfare standards. The company says around 95% of pigs in the country are raised "conventionally" and do not meet its requirements.

To address the shortage, it recently partnered with Karro Food, a pork supplier in the U.K. About 40 percent of stores still don't have carnitas, but Chipotle expects all locations to serve it again by the end of the year. While carnitas are only small share of orders compared to chicken and beef options, the shortage has negatively impacted stores' ability to grow comparable sales.

Looking ahead, the chain, which helped to pioneer new expectations about ethical sourcing and ingredients in fast food, is also seeing more competition from chains like Panera, and even Taco Bell and Pizza Hut, which made sweeping announcements this spring about removing artificial ingredients. Today, Chipotle launched a new campaign called "Friend of Faux" that aims to point out how Chipotle's ingredients are different, including its commitment to a menu free of genetically modified organisms.

"With competitors making pledges, we're strengthening our marketing message to continue to show the contrast between what Chipotle has always done and the changes others are pledging," co-CEO Steve Ells told investors on the call.

For the full year 2015, Chipotle expects comparable restaurant sales to increase in the low-to-mid single digits. It will also open roughly 200 new restaurants, after opening 97 stores between January and June. There are currently 1,878 restaurants.

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