Friday, April 18, 2014

The "There Is No Inflation" Report (Chipotle Edition)

From CNN:
Chipotle has been on an big expansion push, opening new locations around the country with people often lining up for the restaurant's debut in their towns. And it has no plans to slow its roll. The company expects to open up to 195 new stores in 2014.
But rising prices for staple ingredients have been giving Chipotle some indigestion. Food costs ate up nearly 35% of its revenue in the quarter.
Beef prices have risen to all-time highs as cattle farmers recover from two years of drought. Chipotle said its paying 25% more for steak. It expects cheese prices to increase 10% and the supply of avocados is down due to dry weather in California.
With all the food price inflation, Chipotle plans to increase menu prices for the first time in three years, said chief financial officer Jack Hartung.
"We're at a point where we need to pass along these rapidly rising food prices," Hartung said in a conference call with analysts. Menu prices will go up "somewhere in the mid- single digits" on a percentage basis, beginning this quarter, he said.

8 comments:

  1. Whenever there is a drought, the Fed should raise interest rates, tighten credit, drive up unemployment to keep food prices from rising due to the drought. Better yet, get rid of fractional reserve banking and have a fixed amount of money in the economy. That way when there is a drought, rising food prices will suck money away from other goods and services, drive up unemployment and you have a lot of broke unemployed hungry workers ready to do anything for a Koch Bros dollar.

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    1. the only thing the FED should do is quit.

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    2. Voila. Congratulations small smugman, you have so simply described exactly what would happen over...some time frame...clearly you have given every variable and its functions a thorough vetting.

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    3. shall we even bother going throught the motions of what would happen in a free market if there is a shoirtage and prices rise?

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    4. Re: Heath,

      Well, I wouldn't bother with asking the economically-ignorant JW how exactly would keeping interest rates artificially low supposed to conjure up food during a drought, or why would a fixed amount of money have any detrimental effect on the market incentive process that would entice entrepreneurs to import food from places with no drought; but I don't want to drive the poor guy to suicide.

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  2. Whenever there is a drought, the Fed should do nothing. Whenever there is a deluge, the Fed should do nothing. Whenever there is day after day of picture perfect weather, the Fed should do nothing.

    In short, no matter the weather, the Fed should do. . .nothing. Except go away.

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  3. 35% of revenues isn't all that out of line, though with Chipotle's prices it seems a bit high. i am going to have to glance through their financials.

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