Chipotle (CMG) lovers can still add guac to their burritos without busting their wallets.
CFO Adam Rymer told chof360 Finance that the company is keeping a "close eye" on the fluid tariff situation. The Trump administration announced a 25% tariff on Mexican and Canadian imports, set to take effect in about a month's time, and an additional 10% tariff on Chinese goods that went into effect Tuesday.
"We don't necessarily want to act quickly with price," he said, emphasizing there won't be price increases in the near future. "We're going to be very patient when it comes to this to get an idea if these are going to be permanent or if they're not going to be enacted at all."
"As the tariffs come in, we're able to absorb these costs for a very long period of time," Rymer added. If the tariffs turn out to be a "permanent" hit to the business, Chipotle would increase prices to offset the effect but not to grow its margins. The tariffs are estimated to have an ongoing 60 basis points impact on its cost of sales if they were to go into effect.
Read more: What are tariffs, and how do they affect you?
Only 2% of Chipotle's cost of sales come from Mexico, "which includes avocados, tomatoes, limes, and peppers." The company used to import 90% of its avocados from Mexico, but now it imports half from Mexico, and the other half from Colombia, Peru, and the Dominican Republic, William Blair analyst Sharon Zackfia wrote in a note.
Still, Zackfia noted that potential risks to the stock include the "outsized exposure to avocado costs."
It sources less than 0.5% of its cost of sales from Canada and China.
"We're not completely dependent on one region ... we'll continue to make sure that we're diversified, but it's not something that we could switch very quickly. But we've done that over time, and we'll continue to do that over time," Rymer said.
If tariffs don't go into effect, food margins for 2025 should improve compared to the prior year, per a Bank of America client note. In 2024, Chipotle had to contend with rising avocado prices and investing in portion sizes.
On Tuesday, Chipotle reported fourth quarter and full-year results that were largely in line with analyst estimates. However, it issued a conservative 2025 guidance of same-store sales growth in the low- to mid-single-digit range.
For Q4 and fiscal 2024, Chipotle reported same-store sales growth of 5.4% and 7.4%, respectively.
Value will remain a key strategy. The company took market share from quick-service players in 2024, with a "30% discount on average" to its peers' food, CEO Scott Boatwright told investors on an earnings call Tuesday. The company raised prices in December by 2%.
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"We're very careful with when we take a price increase because we really want to maintain that value proposition that we have amongst our peers and in the industry," Rymer said.
In a note to clients, BTIG analyst Peter Saleh said if the company doesn't enact any additional price hikes, "2025 same-store sales would benefit by 200 basis points from the current price taken in December 2024."
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Brooke DiPalma is a senior reporter for chof360 Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
