Noting that just roughly half of its avocados come from Mexico, Chipotle Mexican Grills stated on Tuesday that it does not anticipate significant cost increases if tariffs on essential imported products take effect next month.
President Donald Trump postponed his intentions to impose 25% tariffs on imports from Canada and Mexico one day earlier. Restaurants would undoubtedly attempt to pass on the higher cost to their patrons if imports like avocados and meat were made more expensive after the one-month embargo.
However, Chipotle management dismissed the concerns about tariffs during Tuesday’s earnings conference call. Chief Financial Officer Adam Rymer estimates that Chipotle’s cost of sales will increase by around 60 basis points, or 0.6 percentage points, if tariffs targeting China, Canada, and Mexico all take effect.
According to Rymer, Chipotle imports food including avocados, tomatoes, limes, and peppers, and only sources around 2% of its sales from Mexico.
According to CEO Scott Boatwright, Chipotle purchases nearly half of its avocado supply from Colombia, Peru, and the Dominican Republic, but Mexico provides over 90% of the avocados consumed in the United States. Chipotle has taken action to purchase more avocados from sources other than Mexico in recent years, he informed analysts.
Beyond Chipotle’s supply of guacamole, fewer than 0.5 percent of its sales come from China and Canada. A 10% tariff on Chinese goods has already been implemented by Trump.
Even as consumers grow increasingly cost-conscious, Chipotle has demonstrated in recent quarters that it has pricing power.
The company recorded a 5.4% gain in same-store sales for the fourth quarter, driven by a 4% increase in traffic. Although Chipotle’s earnings exceeded Wall Street projections, shares fell 5% during extended trading due to a cautious prediction for the growth of its same-store sales.
The impact of any tariffs was not included in the outlook.
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