You're watching...
Chipotle Mexican Grill CFO Jack Hartung on the latest earnings report and how commodity prices are impacting business.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
-- -- what will a weak consumer come -- with high food prices mean for restaurants well.
If you take chipotle individually the stock is up nearly 600%.
But that since its IPO years ago.
Recently though it took a hit with a soft earnings report joining us now from Chicago is Jack -- -- he's the chief financial officer.
-- chipotle Mexican group good to see Jack thank you for being here your your don't second quarter July numbers.
Missed revenues -- mean that it missed revenue -- certainly so I need to know is that due to excessively high commodity prices or a consumer.
Who says I don't have the money to spend on chipotle Mexican.
Well we we think the slowdown that we -- Liz was more because a consumer that's not as confident as the consumer once was and -- -- how we saw was a a fairly slight slowdown we have a lot of things in our quarter.
We still that an 8% -- during the quarter it was still one of the highest Indian history.
But the expectation was -- 10% and so we think that there was a slight follow up and we think it's mainly because of kind of a broad based.
Slight decline and in consumer confidence and consumer spending -- Let me just play devil's advocate here if that were true or what how how is it that Jack in the Box is -- -- was doing relatively well.
And you've also got Yum! Brands Taco Bell which it seems to have better same store sales which.
That then leads people to say this is chipotle specific make the case against the theory.
Yeah you know our our -- compared to you know cute -- over the first company in the U mentioned are are much much higher I think -- -- not the low to mid single digits so we're we're still at 8%.
Way above their numbers.
You know taco -- doing great you know yet you gotta give them credit there they're appealing to their customers right now but some people have said -- -- Taco -- is taking away from chipotle and we just don't see that when you look at the timing of when -- -- -- Sales started to rise which was in the first quarter our sales what we're still you know holding up very very strong we had double digit comps in the first quarter.
On the and -- and come up with -- -- their new menu that they're now you know touting is like a sound like a knockoff of a chipotle cheaper version of -- and Tom we haven't seen a saint a change in our sales trend since they introduce -- so.
We don't see a correlation between what Taco -- is doing and and the sales slowdown -- AAA and you know frankly we we we you know we think that a -- -- -- while they're very very loyal and they keep coming that we just think that they're being a little bit cautious right now because of uncertainty with the economy.
Of course I may I get that because.
Every day at some nightmarish headline that comes out but right.
With you -- -- pick apart a burrito bowl and it's funny our stuff just happens to always figure out a way to have burrito bowls as props because they love them across the street here in.
Sixth avenue and forty -- but there is beef there is chicken there is corn right there all kinds of things.
There is my floor director stealing a bike but.
You -- directly from local farmers as well as some marches distributors but will you have to change the way you buy your commodities.
No you know we buy most of our food from as you mentioned local farmers small farmers from -- we buy as many organics as many you know -- -- -- we can from local farmers.
We by -- for -- -- needs meets down you know where the animals are rate raised humanely they're not treated with antibiotics they have access to outdoors things like that and so.
We built a supply relationship with these.
Comes in a smaller farmers -- and and smaller growers.
Over the last decade and we have a very strong relationship with them -- problem with us as well.
So we don't plan on changing where we're gonna get our food from.
The cost of all ingredients are are going to go up with the -- going -- our we don't expect that to happen until.
Later this year or into 2013 but we're not gonna change or buying -- heard -- from.
-- project is -- a lesson to be learned or mistakes from which to learn what it comes to marketing your marketing money that you.
Focused upon -- not as much as in the past and there's Taco Bell -- -- -- to bring them back up again but they spent a lot are you going to change that and start a new marketing programs.
You know we're not going to change because of that we have been evolving our marketing our marketing has always been less about driving short term transactions.
And more about educating consumers about engaging consumers in an entertaining way.
We are about -- where we're going to engage -- arc -- our customers and prospective customers.
An emotional way -- -- you know we recently came up with eight.
Great video called back to the start it was award winning -- connected with over forty million people the response to that video was.
Incredible and yet the words of holier than into -- Didn't show up until the last fifteen seconds 882 minute and 152 video but it touched people in an emotional way because it showed.
Farming the transition from from traditional farming and -- pastors share to more -- you know to more confined to farming.
And -- -- return back to traditional farming -- that connected with people's -- market is gonna move more and that correction.
That it is towards traditional -- Instead of just hammering people over the head with -- to publish what you know Procter gamble just about out the Olympics with -- -- right -- program that we saw PNG at the end good to see you Jack good luck to you thank you.
Okay thanks list -- -- -- is the chief financial officer of chipotle Mexican.
