Editor’s Note: Ever since a new Chipotle Mexican Grill (NYSE: CMG) restaurant opened in our neighborhood earlier this year, my wife and I have been frequent visitors. We like it because it’s convenient, affordable, and the food is relatively nutritious compared to most other fast casual restaurants.

I must admit that I am a latecomer to the Chipotle bandwagon. For a long time, I thought it was trying too hard to be hip with its metallic industrial design vibe and cafeteria style serving stations.

But now that I’ve gotten used to it, I appreciate the simplicity and cleanliness of its stores. It’s also nice to know that I’ll never have to sit at another ketchup-smeared table in a burger and fries joint again!

Significant Headwinds

Evidently, a lot of other people like eating at Chipotle, too. According to Technomic, “Strong growth from Taco Bell and Chipotle Mexican Grill helped propel overall Mexican chain sales past the pizza category.” Chipotle ranked seventh among fast casual food chains in the United States last year with total sales of $11.2 billion.

That puts it slightly ahead of Burger King ($11 billion), but far below archrival Taco Bell’s $16.2 billion in sales. All those numbers pale in comparison to industry leader McDonald’s (NYSE: MCD) at $53.5 billion in revenue.

As impressive as those numbers may seem, they were weaker than expected. According to Kevin Schimpf, senior director of industry research at Technomic, “The restaurant industry faced significant headwinds in 2024, including higher prices, shifting consumer spending patterns and increased competition.”

Comparable Store Sales Decline

I noticed that dynamic when Chipotle released its fiscal 2025 Q1 results three months ago. Although the company’s first quarter total sales increased 6.4 percent on a year-over-year basis, its comparable store sales decreased by 0.4 percent.

The company attributed that decline to “to lower transactions of 2.3%, partially offset by a 1.9% increase in average check.” It blamed “several headwinds including weather and a slowdown in consumer spending” for the decline.

In other words, the increase in total sales was due to new store openings and not improved performance. Nevertheless, its share price rose from a closing price below $49 on the day those results were released to above $56 on July 2.

More of the Same

That’s the day that I issued a buy alert to subscribers of my PF Pro trading service. Except in this case, I recommended buying a put option on CMG that expires on July 25 at the $53 strike price.

Since a put option increases in value when the price of the underlying security goes down, I was betting on CMG to quickly reverse direction. As I noted in my alert, Chipotle “appears to be a business that is gradually losing market share and isn’t sure what to do about it except keep doing more of the same.”

I further opined, “Opening new restaurants may help the top-line sales figures, but the cost of doing so will most likely impinge on bottom-line profitability.” For that reason, I was not expecting the company’s Q2 results to show improvement over its unimpressive first quarter performance.

Winning From a Loss

By the time you read this, Chipotle will have released those Q2 results. To me, it no longer matters. The put option that we could buy for $1 a share three months ago could be sold for a little over $2 at the start of this week so I closed out that position at a return on investment of 104 percent in just three weeks.

To be clear, I am rooting for Chipotle to find a way to increase its comparable store sales without raising prices too much. Seems like it wasn’t that long ago that I could buy lunch at a fast casual restaurant for $6 instead of paying $12 like I do now.

In the meantime, Chipotle announced that it will expand its geographic footprint by opening restaurants in Mexico beginning next year. It remains to be seen if selling an Americanized version of Mexican food to Mexicans in Mexico is a good idea, but if it works then Chipotle may be soaring up the charts by this time next year!