Retail and restaurant chains are starting to feel the impact of persistent inflation, especially as lower-income customers cut back on spending.
Burrito chain Chipotle Mexican Grill Inc. (NYSE:CMG) recently saw its stock tumble 19% in a single day after missing third-quarter revenue estimates and cutting its full-year same-store sales forecast. The fast-casual restaurant chain, where an average burrito and bowl costs about $10-$12, is struggling as fewer young Americans dine out due to rising inflation and weakening consumer sentiment, Chief Executive Scott Boatwright told analysts during its Q3 earnings call last month.
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"The gap has widened, with low to middle-income guests further reducing frequency," Boatwright said. "We believe that this guest with household income below $100,000, represents about 40% of our total sales."
‘Broad-Based' Pullback in Eating Out
Boatwright said that following a steep decline in consumer sentiment earlier this year, Chipotle is seeing a "broad-based" pullback in dining out across all income cohorts.
A report from the Conference Board showed last month that its consumer confidence index fell for a third straight month in October to its lowest level in the past six months.
Americans aged 25 to 35 are dealing with "several headwinds," such as unemployment, increased student loans, and slower wage growth, according to Boatwright.
"We tend to skew younger and slightly over-indexed to this group relative to the broader restaurant industry," he added.
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Chipotle now sees its same-store sales declining in the low-single-digit range in 2025, compared with its prior forecast for it to remain flat. This was the third consecutive guidance cut by the company. Its shares are down 47% so far this year.
‘We're Losing Them to Food at Home'
Asked where customers are going instead, Boatwright said that younger Americans are preferring to eat at home instead of dining out due to rising costs.
"We’re not losing them to the competition," Boatwright said." We’re losing them to grocery and food at home. And so that consumer is under pressure. It is one of our core consumer cohorts. And so they feel the pinch, we feel the pullback from them as well."
Boatwright said the current quarter and Q1 of Chipotle's fiscal 2026 are expected to be the "toughest" for consumers, with some relief anticipated in the second quarter.
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