- Chipotle Mexican Grill does not expect a major disruption from President Donald Trump's potential tariffs on Mexico, and said it only sources about half of its avocados from Mexico.
- If Trump goes ahead with his plans to impose 25% tariffs on imports from Mexico and Canada, in addition to 10% duties on Chinese goods, Chipotle expects to see its cost of sales rise 60 basis points, or 0.6 percentage points.
- In recent years, the burrito chain has taken steps to buy more of its avocados outside of Mexico, CEO Scott Boatwright said.
said Tuesday that it does not expect costs to rise much if tariffs on key imported ingredients go into effect next month, noting that only about half of its avocados come from Mexico.
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WATCH HEREA day earlier, President Donald Trump for 25% tariffs on Mexican and Canadian imports. If implemented after the one-month suspension, imports such as avocados and beef would be more expensive for restaurants, which would likely try to pass on the increased cost to their diners.
But Chipotle executives shook off the tariff fears during the conference call on Tuesday. If tariffs aimed at Mexico, Canada and China all go into effect, Chipotle expects that its cost of sales would rise about 60 basis points, or 0.6 percentage points, according to Chief Financial Officer Adam Rymer.
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SIGN UP Chipotle only sources about 2% of its sales from Mexico, importing produce such as avocados, tomatoes, limes and peppers, Rymer said.
In fact, while Mexico supplies roughly eaten in the U.S., Chipotle buys about half of its avocado supply from Colombia, Peru and the Dominican Republic, according to CEO Scott Boatwright. In recent years, Chipotle has taken steps to buy more of its avocados outside of Mexico, he told analysts.
Looking beyond Chipotle's guacamole supply, less than 0.5% of Chipotle's sales are sourced from Canada and China. Trump has already imposed a 10% tariff on Chinese imports.
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In recent quarters, Chipotle has shown that it has pricing power, even as diners become more value-conscious.
For the fourth quarter, the company reported same-store sales growth of 5.4%, fueled by a traffic increase of 4%. Chipotle's earnings topped Wall Street estimates, but a conservative forecast for its same-store sales growth sent shares down 5% in extended trading.
The outlook did not include the effect of any tariffs.
