The Billion Dollar Burrito

You are what you eat. JL

Stephanie Strom reports in the New York Times:

Sales at Chipotle, the restaurant chain that has come to symbolize the tastes of the millennial generation, continued to break the billion-dollar barrier in a single quarter, despite a problem with its pork supply that caused some of its more than 1,800 stores to run short on carnitas.

Earnings reports on Tuesday from three prominent restaurant operators, including Chipotle Mexican Grill, illustrated the impact of the changing preferences of American consumers.

Sales at Chipotle, the restaurant chain that has come to symbolize the tastes of the millennial generation, continued to break the billion-dollar barrier in a single quarter, despite a problem with its pork supply that caused some of its more than 1,800 stores to run short on carnitas.

Brinker International, which operates Chili’s and Maggiano’s, said it was hoping further investments in technology to build customer loyalty would help it sustain and build sales, which climbed 3.3 percent, to $784.2 million, in its third quarter, which ended March 25.

Yum Brands, the company behind KFC, Taco Bell and Pizza Hut, continued to struggle to regain its footing in China, where sales remain weak after one of its meat suppliers was hit last year with a food safety scandal.

So-called fast-casual restaurants like Chipotle, which allow their customers to tailor their meals, and still have them ready in a flash, are booming right now, playing to consumer tastes for customization, speed and ingredients from sources that adhere to animal welfare, organic and other standards.

Sales in its stores open at least one year were up 10.4 percent in the first quarter, which ended March 31. Overall sales were up 20.4 percent to $1.09 billion, compared with $904.2 million in the same period last year. Profits jumped 47.6 percent to $122.6 million.

“We are very proud of our start to 2015, as our average sales volumes reached a record $2.5 million per restaurant,” Steve Ells, Chipotle’s co-chief executive, said in a statement.

Investment analysts, however, had been expecting stronger comparable sales, and the company’s shares, which rose 0.8 percent on Tuesday, fell more than 5 percent in after-hours trading.

John R. Hartung, the company’s chief financial officer, said in a conference call with the analysts that the shortage of pork and how it was dealt with, along with harsh weather in some parts of the country, had reduced comparable store sales by 1 to 2 percent.

Chipotle has rotated supplies of pork around the country so that all stores have carnitas at some point. “This rolling blackout has caused confusion among our customers, and where and when we’re out of carnitas,” Mr. Hartung said. “Starting later this month, we’ll stop the rolling blackout.”

Yum’s chains are fast-food restaurants, the segment of the business that has been hardest hit by the rise of Chipotle and others. Its sales fell 4 percent, to $2.6 billion, in its first quarter, which ended March 21.

The company struggled to turn the tide in its KFC and Pizza Hut stores in China, where same-store sales dropped 12 percent — an improvement, according to Jonathan Blum, Yum’s chief of public affairs. “Our sales continued to improve, and while still down, are down less this quarter than they were last,” Mr. Blum said. “So the trajectory is in the right direction.”

Outside China, comparable store sales were up 5 percent at KFC and 6 percent at Taco Bell, while flat at Pizza Hut.

Profits dropped 9 percent, to $362 million, compared with $399 million in the same quarter last year.

Still, that was better than investment analysts had predicted, and the share price of Yum Brands was up more than 3 percent in after-hours trading.

Brinker is among the restaurants at the forefront in using technology to build ties with consumers, as well as make kitchens more efficient.

In a call with analysts on Tuesday, Wyman Roberts, chief executive of Brinker, said that the company’s new loyalty program would soon begin allowing customers to use points accrued in their American Express accounts to pay for their meals, and that improvements to its apps and software in stores was aimed at reducing wait times.

Mr. Roberts said there was nothing worse for a restaurant than “having a customer make the decision to get to your restaurant and then decide the wait is too long, turn around and walk out.”

Brinker said its sales in stores open at least a year rose 1.9 percent. Profits rose 16.4 percent, to $65.4 million, compared with $56.2 million in the same period a year ago.

Its shares fell 3.7 percent to $56.84.