Chipotle stock plummets as earnings struggles persist

In 2025, Chipotle Mexican Grill faced considerable challenges as its stock declined 15% year-to-date, significantly underperforming the S&P 500, which posted a modest 1% gain. This decline was attributed to a variety of factors, including a 0.4% drop in comparable-restaurant sales, largely due to a 2.3% decrease in foot traffic. Even with a 1.9% rise in average check size, overall operating margins compressed by 130 basis points to 26.2%. Rising expenses, mainly in food and labor, and increased portion sizes also contributed to this downturn. Additionally, tariffs projected a further 50-basis-point negative impact on margins. For the full-year financial projections, Chipotle expected low single-digit comparable sales growth, with hopes of positive traffic in the latter half of the year. Although the company reported a revenue increase, growing at an average rate of 14.4% over the last three years, it faced scrutiny over its high stock valuation relative to the overall market. Chipotle's price-to-sales ratio stood at 6.1 compared to the S&P 500's 2.8, while its price-to-earnings ratio was notably high at 44.7 against the benchmark’s 24.5, leading analysts to question whether the stock was a wise investment at its current level. Despite these challenges, Chipotle maintained a strong balance sheet, with a debt figure of $4.5 billion compared to a market capitalization of $70 billion. This resulted in a favorable debt-to-equity ratio of 6.6% as opposed to the S&P 500's 21.5%. Furthermore, the company demonstrated a strong cash-to-assets ratio of 15.5%. However, the overall resilience of CMG stock during downturns was viewed as neutral. The tumultuous economic landscape, marked by inflationary shocks and previous crises, raised concerns about how Chipotle would fare in potential future economic downturns. In summary, while Chipotle Mexican Grill revealed robust revenue growth and a strong balance sheet, its high valuation has indicated that investors should proceed with caution. The overall outlook for the stock remained uncertain as the company anticipated challenges ahead in market competition and operational expenses.