Investing.com -- Chipotle (NYSE:CMG), the popular fast-food chain, unveiled its earnings for the fourth quarter today. During a conference call, the company highlighted that their guidance does not consider the potential effects of recent tariffs on goods imported from Mexico, Canada, and China.
The company sources approximately 2% of its sales from Mexico, including key ingredients like avocados, tomatoes, limes, and peppers. Sales sourced from Canada and China represent less than 0.5% of their total sales.
For the first quarter, Chipotle anticipates that their cost of sales would be in the high 29% range. This figure is due to a combination of pricing leverage and the reduced demand for brisket, which will be partially counterbalanced by increased costs for several items, notably avocados and chicken.
The company’s supply chain team has reportedly made significant strides over the past few years in diversifying vendors and shifting some country of origins away from Mexico. Presently, Chipotle sources from Colombia, Peru, and the Dominican Republic, in addition to Mexico. In fact, only about 50% of their avocado supply now comes from Mexico. The company mentioned in its prepared remarks that this shift has led to about a 60 basis points impact.
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