If at any time this year you tried to order a carnitas burrito stuffing at your local Chipotle shop, there was a good chance you were turned down. The restaurant chain yanked the ingredient out of 33% of its locations in January after it suspended a pork supplier who was violating the company's animal welfare standards.
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Chipotle also took a significant profit hit from the pork shortage. That's because management decided to hold off on raising steak prices at the locations that were missing carnitas so that they could a void "having customers trade from carnitas to steak or barbacoa and then be forced to pay more for their meal," according to executives.
The good news
On the plus side, the company generated plenty of goodwill by standing firm on its animal treatment practices. "Since making this decision, we have heard from thousands of our customers who have expressed support for our decision," CEO Steve Ells said in a recent press release. Any event that put the focus on Chipotle's "food with integrity" mission is likely a positive for the brand and the business, even if it does hurt short-term profits.
And then there's the bounce back to look forward to. Chipotle's latest forecast, issued in July, calls for growth in the low to mid single-digit range for the full year (it posted 10% and 4% comps gains for the first and second quarters, respectively). That would represent a big slowdown from 2014's scorching 17% comp improvement.
But investors should keep in mind that this outlook didn't account for the impact of carnitas making it back on the menu for much of the third quarter and the entire fourth quarter. That win will be giving a lift to customer traffic, sales, and profits. And assuming management is right about the fierce loyalty of carnitas fans, it's reasonable to expect the ingredient's return to push sales growth toward to top end of Chipotle's 2015 guidance, if not above it.
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The article Chipotle Mexican Grill Inc.'s Coming Carnitas Bounce originally appeared on Fool.com.
Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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