HEDGEYE CONSUMER SURVEY: DOES CMG HAVE PRICING FLEXIBILITY?

CMG remains one of our core longs in the restaurant space.

 

With CMG getting set to release EPS after the close, one of the topics that will be top of mind is pricing and the consumer's reaction to the recent menu price increase.  We recently surveyed 500 consumers to gauge their response to Chipotle's recent menu price increase.

 

Summary: We believe CMG has the flexibility to raise prices, but as with any consumer company it is limited.  The results of our survey suggest that most consumers are resistant to the price increase, but the details under the hood suggest that CMG's core consumer is much more open to it.

 

THE HEDGEYE SURVEY

Question: Chipotle Mexican Grill is raising prices. Why will you pay more for its food?

 

Respondents were given four answers to choose from:

  1. I will not pay more
  2. Natural, high quality ingredients
  3. The speedy, customized service style
  4. Both

 

Not surprisingly, 51.4% of consumers said they would not pay more for Chipotle's food.

 

HEDGEYE CONSUMER SURVEY: DOES CMG HAVE PRICING FLEXIBILITY? - 1

 

What is interesting, however, is that 65.7% of consumers age 65+ made up the largest portion of those resistant to higher prices.  Importantly, Chipotle's key cohorts (Millenials and Gen Y) are much more forgiving about the price increase.  Additionally, the younger cohorts valued high quality ingredients more than the older cohorts.

 

HEDGEYE CONSUMER SURVEY: DOES CMG HAVE PRICING FLEXIBILITY? - 2

 

Lastly, it appears suburban consumers are far more resistant to price increases than urban consumers.

 

HEDGEYE CONSUMER SURVEY: DOES CMG HAVE PRICING FLEXIBILITY? - 3

 

If you would like more details about our Chipotle pricing survey, please give us a call.

 

Howard Penney

Managing Director

 

Fred Masotta

Analyst


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more