Chipotle shares drop as margins face heat from tariffs, inflation

Chipotle Mexican Grill shares tumbled nearly 18% premarket on Thursday, after the burrito chain's third

sales forecast cut this year fanned concerns around how restaurants are navigating tariffs, inflation and shifting spending habits.

Uncertainty around tariffs

in the U.S. and steep prices are making Americans rethink everyday purchases, and some businesses are in turn tweaking their strategies to capture and retain demand. Chipotle executives pointed to a sharp pullback from U.S. households earning less than $100,000 a year, a cohort that accounts for about 40% of its sales and which the company categorizes as low- to middle-income.

"Traffic growth is the remedy, which could be hard for Chipotle to engineer given current trend, and lower frequency of visits among $100,000 and lower household incomes," said Jim Sanderson, analyst at Northcoast Research. Its customers aged 25-35 years are also under pressure from rising unemployment, resumed student loan payments and sluggish wage growth.

President Donald Trump's levies on imports of beef - Chipotle's most bought ingredient - have pushed up costs

of the commodity, but company executives promised a "slow and measured" approach to price hikes in 2026 rather than fully offsetting the increase in expenses. "While the move will pressure margins, we think it's the right thing to do," Chief Financial Officer Adam Rymer said on a post-earnings call.

Coffee chain Starbucks has also indicated soft consumer spending and margin pressure due to rising coffee bean costs. As a reflection of Chipotle's difficulties balancing traffic, promotions and varied consumer tastes, its shares having fallen 34% so far this year, while peers McDonald's has gained more than 4%, and Domino's Pizza has fallen about 3%.

At least four brokerages cut their price targets on Chipotle, which trades at a 12-month forward price-to-earnings ratio of about 30.08 compared with McDonald's at 23.05 and Domino's Pizza at 21.11. "Near-term, marketing and menu innovation may not be enough to convince consumers that Chipotle represents the value they seek relative to peers across the sector," Sanderson said.