In the wake of Chipotle’s ongoing troubles, its misfortune continues to grow as industry analysts look at how rising avocado prices will hurt Chipotle.
Analysts at Credit Suisse say that the recent spike in avocado prices could have “material ramifications” for Chipotle’s third quarter earnings, reports The Street.
While the chain’s avocado buyers know how to weather these kinds of seasonal fluctuations, they are not used to expecting changes on these levels. To note, avocado prices have jumped about 75% just since mid-July, partly because of shortages in Mexico and California.
Compared to this same time last year, avocados cost about 50% more, which is bad news for Chipotle, as avocados are an estimated 10% of the company’s total costs.
Markets Insider reports that the company was not likely ready for this jump in prices, either: Executives predicted a 20% seasonal drop in prices going into the second half of 2017, but instead they will likely go up by 10%, reports
This avocado inflation — along with recent headlines involving a norovirus outbreak, and a battery found in a burrito bowl — has left Credit Suisse analysts saying that they would stand clear of buying Chipotle shares right now.
This invites the question of whether or not guac prices will increase even further as these high avocado prices hit Chipotle’s customers. An extra dollar per order could be an easy fix for the chain, but Chipotle’s past though this has not happened in the past (thankfully).
“We don’t provide financial updates between quarters, and will update all of our financials, including food cost trends, when we release third quarter results in October,” Chipotle spokesman Chris Arnold told Consumerist when we asked whether there are any plans to raise prices amid the current avocadopocalypse.
To note, an older edition of this article was published on August 25, 2017, on Consider The Consumer.