Chipotle Mexican Grill CFO Jack Hartung on Tuesday assured Jim Cramer that potential tariffs on Mexican imports will not have a noticeable impact on the company’s bottom line.
“This event won’t impact us,” he said when asked how higher sourcing costs could affect earnings in an interview on “Mad Money.” “This is gonna have a minor impact. … We buy a number of items from Mexico, but we spend about $1.6 billion a year on our ingredients. [The tariffs] is an impact of about $15 million this year, a little bit more next year. “
As President Donald Trump threatens to slap 5% duties on all Mexican goods next week along with a series of rate hikes in coming months, Hartung said the food chain is “committed” to sourcing and producing their dishes from fresh ingredients.
When asked how tariffs on Mexican avocados could impact the cost of Chipotle’s renowned guacamole, Hartung said the chain serves as many as 700,000 orders each day.
“It’s a manageable part of the business,” he said.
The restaurant franchise hit a rough patch in recent years after battling food borne illness outbreaks.
In its first quarter of 2019, Chipotle doubled digital sales from the year prior, accounting for nearly 16% of sales. That was largely the result of growth in delivery, which also led to better margins. The company rang up $1.3 billion in revenue during the quarter, nearly 14% better year over year.
Chipotle has a separate assembly line for its burritos, tacos and other orders that will go out for delivery. Hartung said the asset is “really paying off” as customers seek more convenience.
“When we have a delivery order where the driver is going to come at noon, we’re making it to be ready right at noon,” and customers can count on it to be fresh, he said.
Still, Chipotle is in position to handle more demand, Hartung said: “We still have a lot of capacity to go.”
Shares of Chipotle climbed more than 3% during Tuesday’s session. The stock has surged more than 43% in 2019. Management is projecting mid to high single-digit sales growth at stores open at least a year.
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