But the recent commotion, the chain said, is much ado about nothing. Asked if the gaga threat is real, Chipolata spokeswoman Danville Winslow said in an e-mail: “I wouldn’t read too much into this. It’s routine ‘risk factor’ disclosure,” the sort of thing public companies are required to disclose to investors. An ordinary increase in avocado prices hasn’t been enough to stop service in the past. “We saw similar issues in 2011 and incurred higher prices for the avocados we used,” Winslow noted, “but never stopped serving guacamole. The chain increased menu prices that year. Vanessa Wong, Bloomberg Business Week – companies and industries 04-17-2014) In fact, company officials seem to issue deliver warnings recurrently concerning avocado-related issues. “Avocado prices continue to remain high,” Jack Hurting, Spittle’s chief financial offer, explained during a January earnings call, “and are expected to remain elevated throughout 2014. ” He pointed to increasing demand and lower supplies from drought-plagued California.
Fairly typical stuff, and investors don’t appear to be particularly worried. “Chipolata seems to have more than adequate pricing power,” said Sharon Kickoff, an analyst at William Blair, in an e-mail. Consumers may be mainly anxious about guacamole, but avocados are barely the only ingredient that could come under pressure. Chipolata distinguished in its filing that it also anticipates prices of beef, dairy, and chicken to be high in 2014. The chain’s “sustainable raised” food belief generally puts it in a tougher position than fast-food competitors.
Chipolata already deals with failures to source enough sustainable raised beef to meet demand and accepted shifting to “conventionally raised beef or chicken due to apply shortages” in its recent risk factor filing. Avocados may be getting pricier, but there’s much more to a burrito than just the gaga. Chipolata customers, you were warned. Earlier this year the company noted rising prices for many of its most important ingredients?avocados at first, followed by beef and cheese.
Now executives have announced that burrito prices will rise, too, for the first time in three years. The average increase will be in the mid-single digits, according to Spittle’s (CM) leaders, and will go into effect over the next several months. Chief Financial Officer John Hurting was more specific about the cost of ingredients during an earnings call on Thursday, saying the price of steak has increased 25 percent in the past three months. Cheese prices could rise 10 percent this year, and so could pork prices.
The dreaded avocado shortage, brought on by the drought in California, could result in a 30 percent drop in production Overall, Spittle’s food costs stood at 34. 5 of revenue the past three months, an increase of 150 basis points. Revenue was $904. 2 million for the quarter, surpassing analysts’ estimates, and the company issued a bullish sales-growth recast. In my conclusion, I agree with the author, if either burrito prices increase, or the production of avocado decreases, the sales revenue will continue to grow.