Chipotle Mexican Grill generated stronger customer traffic and raised its comparable-sales outlook during the second quarter of 2026, but higher beef, freight, labor, occupancy, and restaurant operating costs substantially reduced profitability.
Comparable restaurant sales increased 2.2%, consisting of a 1% increase in transactions and a 1.2% increase in average check. The performance marked a sequential improvement from the 0.5% comparable-sales growth reported during the first quarter.
The improvement prompted Chipotle to raise its full-year 2026 comparable restaurant sales guidance to the low-single-digit range. Management previously expected comparable sales to remain approximately flat.
Total second-quarter revenue increased 9.3% to approximately $3.35 billion from $3.06 billion. New restaurant openings were the primary growth driver, while comparable restaurant sales provided a smaller contribution.
Revenue growth did not translate into comparable profit growth at the restaurant level.
Restaurant-level operating profit increased less than 1% to approximately $844.6 million from $838.2 million. Restaurant-level operating margin contracted 220 basis points to 25.2% from 27.4%.
The decline means direct restaurant operating expenses consumed 74.8% of revenue, compared with 72.6% during the prior-year quarter.
Food, beverage, and packaging costs increased to 29.7% of revenue from 28.9%, representing an 80-basis-point headwind.
Chipotle attributed the increase primarily to inflation in beef and freight, along with greater protein and produce usage. Menu price increases and lower avocado and dairy costs partly offset those pressures.
Labor costs increased to 25% of revenue from 24.7%.
The increase reflected higher employee compensation, wage inflation, performance-based bonuses, and additional restaurant staffing intended to improve operating execution and hospitality. Menu price increases again provided a partial offset.
Occupancy costs increased to 5.2% of revenue from 5%, while other restaurant operating costs climbed to 14.9% from 14%.
Other restaurant operating costs increased by approximately $71.1 million to $499.8 million, representing the largest percentage-point increase among Chipotle’s major direct expense categories.
The margin pressure continued a trend visible during the first quarter, when adjusted restaurant-level operating margin declined to 23.7% from 26.2%.
For the first half of 2026, food and packaging costs increased to 29.6% of revenue from 29%, while labor rose to 25.5% from 24.8%. Other operating costs increased to 15.2% from 14.2%.
Chipotle’s companywide operating margin declined to 15.7% from 18.2% during the second quarter.
Operating income fell approximately 6% to $525.6 million from $559.1 million despite the company’s 9.3% revenue growth.
General and administrative expenses increased to $190.5 million from $172.2 million.
The increase reflected legal reserves, performance bonuses, higher wages, and restructuring costs, partly offset by lower stock-based compensation. Adjusted general and administrative expenses increased to $176.2 million from $159.9 million.
Chipotle recorded approximately $3.3 million in restructuring expenses related to its Recipe for Growth strategy and a $10 million adjustment associated with legal proceedings.
Impairment, restaurant closure costs, and asset disposal expenses increased to $13.8 million from $5.5 million.
Net income declined approximately 7.5% to $403.5 million from $436.1 million.
Adjusted net income fell approximately 7% to $418.9 million from $450.4 million. However, reported diluted earnings per share remained flat at $0.32, while adjusted diluted earnings per share remained flat at $0.33.
A substantially lower share count prevented the decline in net income from producing a corresponding reduction in per-share earnings.
Diluted weighted-average shares declined approximately 5.3% to 1.28 billion from 1.35 billion.
Chipotle repurchased $630.7 million of stock during the second quarter at an average price of $32.55 per share. The company ended the quarter with another $1.7 billion available under its repurchase authorizations.
During the first half, Chipotle spent approximately $1.35 billion on share repurchases. That exceeded its $706.4 million of first-half net income and was slightly greater than the $1.33 billion generated from operating activities.
Chipotle held approximately $228.2 million in cash and cash equivalents at the end of June, down from $350.5 million at the end of 2025. Current and long-term investments totaled approximately $546.7 million.
Customer demand indicators were more encouraging than the profit figures.
Digital sales accounted for 38.3% of food and beverage revenue, increasing from 35.5%. The rise in digital penetration occurred alongside positive transaction growth, suggesting that digital orders were not simply replacing weaker in-restaurant traffic.
Chipotle opened 100 company-owned restaurants during the quarter, with 80 featuring a Chipotlane. The company also opened one international partner-operated restaurant.
Management said Chipotlanes continue to improve customer access and convenience while increasing new restaurant sales, margins, and investment returns.
Trailing 12-month average restaurant sales increased sequentially to approximately $3.10 million from $3.09 million. However, the figure remained below the approximately $3.14 million recorded one year earlier.
Chipotle continues to expect between 350 and 370 restaurant openings during 2026, including 10 to 15 locations operated by international partners.
Approximately 80% of new company-owned restaurants are expected to include a Chipotlane.
For the first six months of 2026, revenue increased approximately 8.4% to $6.44 billion. Operating income declined to $922.7 million from $1.04 billion, and operating margin contracted to 14.3% from 17.5%.
First-half net income fell approximately 14% to $706.4 million from $822.7 million.
Chipotle’s second-quarter performance shows that its Recipe for Growth strategy is improving customer traffic and supporting a more optimistic sales outlook.
The central challenge is converting that traffic into stronger earnings while beef, freight, employee compensation, hospitality investments, and other restaurant costs rise faster than sales.
KEY QUOTES:
“Our positive results reflect the momentum we’re building as our Recipe for Growth strategy continues to take shape.”
Scott Boatwright, Chief Executive Officer Of Chipotle
