Chipotle Mexican Grill CMG, -0.07% CMG, +3.35% scheduled to report first-quarter earnings on Wednesday, the consensus among analysts is for a positive, but not rosy guidance. The dynamic challenges that the fast-casual restaurant chain is experiencing are profound. Until recently, it suddenly plummeted 15% last week wiping its market capitalization down as low in the $65 billion range.
That was Chipotle’s revelation in early February when they released an update indicating January sales were down. COVID-related adverse weather conditions and wildfires in Los Angeles were too much churn for customer foot traffic. Despite these setbacks, the company is expected to report a same-store sales growth of 1.7%, indicating some resilience amid the downturn.
The rest of the broader U.S. stock market has been under pressure for months now. This strain is due to many factors, here especially the political uncertainty associated with former President Donald Trump’s presidency. This environment has created a highly volatile backdrop for most other companies, including Chipotle. Renowned investor Warren Buffett has commented on the extreme behavior within markets, advising that maintaining composure is beneficial during turbulent times.
Evercore ISI’s Krishna Guha has warned of a potential “severe” market reaction if Trump attempts to dismiss Federal Reserve Chair Jerome Powell, further contributing to the uncertainty faced by investors. As Chipotle navigates these challenges, its declining share prices have undoubtedly affected its market valuation.
These challenges haven’t deterred Chipotle from attempting to keep growing its footprint. The company recently announced a development deal to open restaurants in Mexico for the first time, marking a significant step in its growth strategy. Through this expansion, it hopes to diversify its revenue streams while bolstering its competitive position in the market over the long term.