The company’s stock is up 43% in 2019…
On Thursday, President Trump threatened to impose additional tariffs on Mexico. These tariffs would start at 5% and could increase to as much as 25% in the coming months.
Almost immediately after this announcement, companies like Chipotle began to experience the potential fallout and speculations began. Will tacos cost more? Will Chipotle still be able to serve guacamole?
After all, the company does import certain food items from Mexico. But according to CFO Jack Hartung, this is a small percentage of the $1.6 billion the company spends on food every year…
Chipotle CFO dismisses concerns over tariffs
Hartung acknowledged that increased tariffs could have a minor impact since the company buys a number of food products from Mexico. But Hartung told CNBC’s Jim Cramer that this is “a manageable part of the business.”
If President Trump’s tariffs are enacted, this could cause Chipotle’s costs to rise by about $15 million. But according to Hartung, the company can find ways to offset these costs.
If these tariffs become permanent, a price increase certainly could be on the table. But Chipotle serves up to 700,000 orders per day so any price increase would be minor. This would allow Chipotle to make up the difference while still maintaining its value proposition.
And Chipotle is no stranger to navigating through difficult situations in the market. In 2015, the company dealt with an E.coli outbreak across 11 states. This could have crippled Chipotle’s business but the company successfully rebounded and its shares are higher than ever.
What’s next for Chipotle?
In the first quarter of 2019, Chipotle doubled its online sales and its overall revenue is up nearly 14%. This is largely thanks to an increase in online delivery options for customers.
Chipotle has an additional assembly line for all its delivery orders. This gives the company more bandwidth when it comes to taking online orders.
It also ensures that customers receive food that is fresh and recently prepared. And the company continues to expand its menu items and test out new options like nachos and quesadillas.
So far, the company’s stock is up 43% in 2019. On Thursday, the stock closed at $706.43 per share.
