How Vulnerable Is CMG to Low-Income Weakness and Trade-Down Trends?

Chipotle Mexican Grill, Inc. CMG is confronting one of the most pronounced shifts in its demand profile, as the company’s core consumer base shows meaningful signs of strain. Management noted multiple step-downs in underlying transactions throughout 2025, culminating in a softer trend exiting the third quarter of 2025 and into October. With these pressures persisting, CMG now anticipates full-year comparable sales to decline in the low single digits and fourth-quarter comps to fall in the low- to mid-single-digit range.

The vulnerability centers on households earning under $100,000, which represent about 40% of Chipotle’s total sales. This group has been dining out less frequently due to inflation, economic uncertainty and rising financial obligations. A particularly pressured segment is adults aged 25 to 34, where Chipotle “over-indexes,” and which has pulled back more heavily than older cohorts. Importantly, CMG’s data reveals that these consumers are not switching to other restaurant brands but are migrating toward food-at-home, a trade-down pattern that tends to recover more slowly.

Chipotle is navigating an environment where fast casual is increasingly seen as less affordable, even though the brand still prices its menu 20-30% below peers. Management acknowledges that this value isn’t always clear to consumers, who respond more to cues around freshness, culinary quality and innovation than explicit price messaging. Against this backdrop, Chipotle plans to avoid aggressive pricing in 2026 despite mid-single-digit inflation, opting instead for a gradual, test-and-learn approach that protects its value gap while gauging consumer sensitivity.

At the same time, management acknowledges that some operational inconsistencies have compounded the macro pressure. A renewed problem-detection survey highlighted gaps in digital accuracy, ingredient availability and in-restaurant cleanliness. Chipotle is responding with system-wide retraining, redesigned bonus structures emphasizing order accuracy and a widescale rollout of its High-Efficiency Equipment Package (“HEAP”). Early HEAP locations are delivering improvements in throughput, prep efficiency, culinary consistency and guest satisfaction — critical inputs to transaction recovery over time.

Chipotle’s exposure to low-income consumer weakness is material, and recovery will hinge on how effectively the company can re-engage this cohort while macro conditions remain difficult. Management is leaning heavily on experience improvements, clearer communication of differentiation and an expanded cadence of menu innovation to reinforce relevance. These strategic levers, combined with preserved value positioning, form the backbone of CMG’s effort to regain momentum heading into 2026, even as its most economically sensitive customers continue to feel the pressure.

CMG Stock Price Performance, Valuation & Estimates

Shares of Chipotle have plunged 43.6% so far this year compared with the industry’s fall of 7%. In the same time frame, other industry players like Starbucks Corporation SBUX, Sweetgreen, Inc. SG and CAVA Group, Inc. CAVA have declined 5%, 79.3% and 56%, respectively.

CMG YTD Price Performance

From a valuation standpoint, CMG trades at a forward price-to-sales (P/S) multiple of 3.46, below the industry’s average of 3.50. Meanwhile, industry players, such as Starbucks, Sweetgreen and CAVA, have P/S multiples of 2.53, 1.02 and 4.12, respectively.

The Zacks Consensus Estimate for CMG’s 2026 earnings per share has declined 14% to $1.22 in the past 60 days.

The company is likely to report strong earnings, with projections indicating a 4.9% rise in 2026. Industry players like Sweetgreen and CAVA are likely to witness an increase of 15.5% and 11.6%, respectively, year over year, in 2026 earnings. Meanwhile, Starbucks' fiscal 2026 earnings are expected to jump 13.6%, year over year.

CMG stock currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research