Chipotle Mexican Grill (NYSE: CMG) raised its full-year comparable sales guidance to low single digits. The move follows a 2.2% comp in Q2, driven by a second straight quarter of improving transaction counts. The headline beat the Street's 2.0% estimate. More important is what the guide raise signals about the trajectory of the business.
Total revenue grew 9.3% to $3.3 billion, against a consensus estimate of $3.33 billion. Growth came from 100 new company-owned restaurant openings (80 with Chipotlanes) and the 2.2% comp. Digital sales rose to 38.3% of food and beverage revenue from 35.5% a year ago. The shift suggests the post-pandemic digital mix is settling higher than pre-COVID levels.
Comparable restaurant sales broke down into a 1.2% increase in average check and a 1.0% increase in transactions. That 1.0% transaction comp is the second consecutive quarter of improvement after Q1's 0.5%. It follows four quarters of negative transaction comps through Q3 2025. The trend is encouraging. Chipotle is regaining traffic without relying entirely on price increases.
Restaurant-level operating margin contracted 220 basis points to 25.2%, the weakest print in at least five quarters. The compression was broad-based. Food, beverage and packaging costs rose 80bps to 29.7% of revenue, driven by beef and freight inflation and higher protein and produce usage, partially offset by lower avocado and dairy costs. Labor costs rose 30bps to 25.0% on wage inflation and performance-based bonuses. Other operating costs jumped 90bps to 14.9%, reflecting higher occupancy and general restaurant expenses. The margin pressure looks structural, not cyclical. Beef inflation and wage growth are not reversing quickly, and Chipotle's ability to offset them with menu price increases is constrained by the competitive environment.
Adjusted diluted EPS was flat at $0.33, matching the prior year and beating the $0.32 estimate by a penny. Net income fell to $403.5 million from $436.1 million, but share repurchases offset the decline on a per-share basis. Chipotle bought back $630.7 million of stock in Q2 at an average price of $32.55. The board authorized an additional $1.3 billion in buybacks, leaving $1.7 billion remaining under the program. The buyback pace looks aggressive relative to operating cash flow of $1.33 billion in the first half. It is the primary reason EPS held flat despite margin compression.
General and administrative expenses rose to $190.5 million from $172.2 million. This includes $10 million in legal reserves and $3.3 million in restructuring costs related to the "Recipe for Growth" strategy. Adjusted G&A was $176.2 million, up from $159.9 million. The legal reserve is a one-time item, but the restructuring costs suggest ongoing operational changes that will take time to flow through to margins.
The guidance raise to low single-digit full-year comps is the key takeaway. Chipotle had previously guided to flat to low single-digit comps. The raise reflects management's confidence that the transaction recovery is sustainable. However, the reiterated new restaurant opening guidance of 350 to 370 units (including 10 to 15 international partner-operated restaurants) suggests no acceleration in unit growth despite the improved comp trajectory. The 80% Chipotlane mix on new company-owned stores is consistent with prior quarters.
What to watch next: whether the transaction comp can sustain its improvement into the back half of the year, and whether restaurant-level margin can stabilize above 25%. The buyback is supporting EPS in the near term, but declining ROIC from aggressive repurchases at elevated multiples is a risk that bears watching. For now, Chipotle is trading traffic recovery for margin compression, and the market is accepting the trade-off.