Chipotle shares tumble 7% on disappointing earnings

Aamer Madhani | USA TODAY

Shares of Chipotle Mexican Grill (CMG) tumbled 7% Wednesday after the casual restaurant chain reported earnings that disappointed Wall Street.

Chipotle on Tuesday reported 12.2% in revenue growth for the third quarter of 2015 but that fell short of analysts projections, as the growing fast casual industry darling faces increased competition.

Diluted earnings per share were $4.59 on $1.2 billion in revenue. The Denver-based chain, which has about 1,900 locations, continues to show strong sales, but fell short of the consensus analysts projection to earn $4.63 per share on revenue of $1.22 billion.

The bar was high for Chipotle, which in the third quarter of 2014, posted earnings of $4.15 a share on revenue of $1.08 billion.

Shares of Chipotle were down $49.60, or 7.2%, to $656.03 in morning trading.

The company has opened 150 new restaurants so far this year, including 53 locations in the last quarter.

Chipotle,which has won a dedicated following by focusing on a limited menu of burritos, tacos, salads and bowls, had reported some supply chain issues earlier this year that had forced it to stop serving pork at some restaurants. The supply issues were the result of the company determining some suppliers had fell short of their standards.

The company said it has returned carnitas to 90% of restaurants, and is now on track to bring it back to 100% of restaurants during the fourth quarter.

Food costs accounted for 33% of revenue in the quarter, down from 34.3% a year ago. But Chipotle also reported that restaurant operating margin fell by 0.5 percentage points to 28.3%, weighed by higher labor costs and higher marketing and promotion expenses.

Company officials also described sales thus far in October as "very, very choppy." Business slowed at the end of the summer following a burrito giveaway promotion in July.

Chipotle announced earlier this month that the company was hiring away Curt Garner from Starbucks to serve as the company's first chief information officer. Garner, who served in the same role at Starbucks, is set to start at Chipotle next months as the company looks to improve its mobile ordering presence.

Chipotle officials told analysts Tuesday they've put minimal emphasis on mobile ordering capability, while the company looked to perfect the experience of the vast majority of customers who come into their local Chipotle to order their food.

But the company say it is increasingly throwing energy into sharpening it's takeout business. Chipotle recently went on a 5,000-person hiring spree, and noted that has directed more of its workers to work secondary food preparation lines that prepare takeout orders.