Chipotle outpaces rivals on strong sales

Chipotle continued to outpace rivals in the fast food sector, reporting strong gains in same store sales as peers including McDonald's, Pizza Hut and Taco Bell fail to ignite consumer interest.

Profits at the chain known for its steak and barbacoa tacos climbed 26 per cent to $110.3m, or $3.50 a share, in the quarter to June 30. Sales climbed 29 per cent to $1.05bn as same-store sales rose 17.3 per cent.

Analysts on Wall Street had expected profits of $3.09 a share from sales of $990m.

The results contrasted with those from McDonald's, which once again saw tepid demand in the US for its burgers and fries. Same-store sales at the company's US outlets declined 1.5 per cent in the quarter, a steeper dip than analysts expected.

While McDonald's has continued to focus its strategy around lower cost items through its dollar menu, executives at Chipotle have lifted prices at the chain's 1,600 restaurants since April, a decision they argue has offset rising food inflation.

The move received little push back from Chipotle's fervent following and the company now expects same-store sales to increase by a "mid-teens" percentage over the remainder of this year.

"We continue to believe Chipotle [is] the best growth story in restaurants," Jeffrey Bernstein, an analyst with Barclays, said. "With most restaurants struggling to drive positive traffic, Chipotle remains an anomaly, justifying an outsized valuation."

Shares in the Mexican restaurant chain soared 13 per cent to $664.94 on the news, while McDonald's retreated 2 per cent to $95.95. Taco Bell owner Yum Brands advanced 1 per cent to $75.04.

Harley-Davidson led the benchmark S&P 500 lower on Tuesday after the company cut its outlook for full-year shipments.

The motorcycle maker now forecasts a 3.5 per cent to 5.5 per cent rise in shipments this year compared to 2013. In April, it had predicted growth of between 7 and 9 per cent.

The company pinned the blame on poor weather and a lull in sales of one of its models before the release of a new version later this year.

Harley-Davidson shares fell 6 per cent at $62.96.

Profits at Coca-Cola, the world's biggest soft drinks maker, slipped in the second quarter as sales in the US failed to lift off.

The company said net income fell 3 per cent to $2.6bn, or 58 cents a share, in the quarter to the end of June. Revenues were also under pressure, falling to $12.6bn from $12.7bn.

Coca-Cola, which built its brand and fortune selling the world fizzy drinks, is grappling with a US market that is losing its taste for sugary drinks.

The company said Coca-Cola volumes in North America edged up 1 per cent in the quarter, while overall sales in the region were flat.

Shares in the company fell 3 per cent to $41.15 while rival PepsiCo declined 1 per cent to $89.20.

Crocs, the struggling maker of colourful plastic clogs that were ubiquitous a decade ago, announced it will close or convert up to 100 of its stores and lay off 183 employees.

The closures are expected to save $4m in 2014 and $10m in 2015, as Crocs seeks to save cash and revive its business.

Crocs announced the move along with second-quarter earnings that were ahead of Wall Street expectations. Shares of Crocs advanced 11 per cent to $16.50.

Netflix shares dipped 5 per cent to $428.33 after the company said its international expansion would drive losses in the division higher.

The company, which started in the US, has expanded aggressively across Europe and racked up losses of $712m abroad since 2012.

The initial losses have not dented Netflix's ambition beyond the US. It plans to add service in France and Germany this September. Analysts with Jefferies said the expansion would "pressure" the company's margins.

Overall, US equity markets rose after a report showed the sale of previously owned homes recovered more than expected and core inflation in the country eased.

The S&P 500 advanced 0.6 per cent to 1,985.91, touching a new record high early in the day, while the Dow Jones Industrial Average climbed 0.4 per cent to 17,121.44. The technology-heavy Nasdaq Composite rose 0.9 per cent to 4,463.08.

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