Shares of Chipotle Mexican Grill (CMG-N) and Starbucks (SBUX-Q) slumped in premarket trading on Thursday, as fresh warnings about weak demand and rising input costs underscored the mounting challenges U.S. restaurant chains face.
Uncertainty around tariffs in the U.S. and steep prices are making Americans rethink everyday purchases, and many businesses are in turn having to update their strategies to make the most of fleeting demand trends.
Chipotle’s third sales forecast cut this year sent its shares nearly 18 per cent lower before the bell, while Starbucks stock dipped about 5 per cent after margins came under pressure from a rise in coffee bean prices partly driven by tariffs.
President Donald Trump’s levies on imports of beef - Chipotle’s most bought ingredient - have also pushed up costs for the burrito chain, but its executives promised a “slow and measured” approach to price hikes in 2026.
“In an environment with traffic declining, it is unlikely that consumers will give Chipotle the authority to raise menu prices. We expect this dynamic to result in significant margin contraction, not just for Chipotle, which can reasonably afford it, but for many of its competitors,” BTIG analyst Peter Saleh said.
Chipotle executives also pointed to a sharp pullback from U.S. households earning less than $100,000 a year, a cohort that accounts for about 40 per cent of its sales and which the company categorizes as low- to middle-income.
While Starbucks posted its first quarter of comparable sales growth after more than a year, analysts remain unsure about the company’s recovery timeline.
“Progress is coming at the expense of significant margin erosion though, so while encouraging, it’s also pushing the earnings recovery further (and further) to the right,” Saleh said.
In a reflection of the difficulties Chipotle and Starbucks face in balancing muted demand with rising costs, their shares have dropped 34 per cent and nearly 8 per cent so far this year. The S&P Composite 1500 Restaurants sub index is down about 1 per cent in 2025, underperforming a gain of about 17 per cent in the broader S&P index.
At least seven brokerages cut their price targets on Chipotle, which trades at a 12-month forward price-to-earnings ratio of about 30.08, while at least three cut their targets on Starbucks, whose PE ratio stood at 32.13.
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