Why Chipotle's Q3 Numbers Will Exceed Tuesday's Mixed Results

Chipotle Mexican Grill, Inc. CMG reported mixed quarterly revenues on Tuesday after the closing bell. Matthew DiFrisco, Guggenheim Partners analyst, was on CNBC Wednesday to discuss Chipotle's numbers and how resolving the issue of not serving pork at many of its outlets soon will result in the company performing better in the third quarter.

Positives And Negatives

"The same-store sales top-line revenue was a slight miss," DiFrisco said. "So, the stock did violently sell off before the conference call. They explained a lot of that away though, on the conference call as far as quarter-to-date July trends turned positive on traffic. So, there was a sign of improvement. I think that aided in the recovery, and then also with typical top-line sales trends missing a little bit, labor de-leverage was a little bit of a concern."

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Pork And Beef Issues

On how the company is working toward resolving the non-availability of pork products at many of its restaurants since past few months, DiFrisco said, "They have found a U.K. supplier now to remedy that issue. Sixty (60) percent of their stores have the carnitas product back in there. Simultaneously, they have taken price on their beef products in those stores. The other stores – 40 percent – will be getting them by the end of the third quarter."

He continued, "When everybody has a full menu, they will be taking up their prices on beef. They don't want to take prices on beef, because they feel like right now that's a substitute for pork, we don't want to hurt the person twice by giving them less product, but also taking up price on the potential substitute product.

"So, there is a really good win here as the third quarter progresses; you are getting more product, so, they will be getting that pork consumer back and they will also be taking pricing," DiFrisco concluded.