Key Points
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Chipotle reported declining comparable-store sales in 2025 and didn’t get off to an impressive start in 2026’s first quarter.
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New restaurant openings are the company’s main growth catalyst, but its narrowing margins are weighing on the stock.
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Former CEO Brian Niccol left Chipotle in 2024, and the company has not been the same since.
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Chipotle Mexican Grill (NYSE: CMG) is experiencing a bit of a comeback on Wall Street. The stock is up by 17% over the past month as earnings approach. However, it has been a tough year for the stock, and the road to a prolonged recovery is filled with speed bumps. The rally may fizzle soon, especially after the company reports earnings on July 29.
Customers are feeling the inflation pinch
Higher inflation has elevated living costs, leaving people with less money to spend on discretionary expenses and less interest in paying for marked-up items. Chipotle falls into both of those categories, and its most recent quarterly results showed that the fast-casual restaurant chain was losing momentum.
The 7.4% year-over-year revenue boost it reported in Q1 looked good, but the key highlight was that comparable restaurant sales only increased by 0.5%. That low comparable sales rate indicates that customers are returning less often, and their order sizes aren’t growing much.
It’s also part of a growing trend. While comparable sales grew 8.4% and 5.4% in 2023 and 2024, respectively, in 2025, Chipotle’s comparable sales fell by 2.5%.
Management expects 2026 comparable sales to be flat, suggesting that its high growth rates are a thing of the past. It explains why hedge fund manager Bill Ackman, one of Chipotle’s staunchest advocates, exited his entire position earlier this year.
Chipotle is also feeling the pinch
Chipotle’s revenue growth isn’t the only thing that is slowing down. The fast casual restaurant chain also reported a 22% year-over-year decline in net income. Low sales growth also came with rising costs. New restaurants tighten margins if they don’t grow quickly enough, and in 2026’s first quarter, labor costs amounted to 26.1% of total revenue, up from 25% a year earlier.
Rising costs and decelerating revenue growth are not a good mix, and Chipotle’s guidance suggests investors should expect more of it. Yet the main cause of Chipotle’s slump may have been that Starbucks (NASDAQ: SBUX) poached Chipotle’s former CEO, Brian Niccol.
He left Chipotle on Aug. 31, 2024, right before comparable sales started to decline. Meanwhile, he has turned Starbucks around, with the coffee giant reporting comparable-store sales growth of 6.2% year over year in its fiscal 2026 second quarter.
Niccol’s departure still looms over Chipotle shares. The stock was trading in the mid-$50s when he left, and it briefly fell below $30 earlier this year. Although a rally has taken shape, investors shouldn’t expect it to last for long.
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Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill and Starbucks. The Motley Fool recommends the following options: short September 2026 $35 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.
