Evidence that Chipotle Mexican Grill Inc's (CMG.N) sales growth cooled in the latest quarter raised concern about other areas where consumers could trim discretionary spending, sending down shares of several other retailers and restaurateurs.
Chipotle's stock shed nearly 25 percent of its value on Friday, a day after the upscale burrito chain's closely-watched sales at established restaurants missed analysts' expectations for the second quarter.
Other companies that rely on consumers having a little extra cash to spend, including Panera Bread Co (PNRA.O), Starbucks Corp (SBUX.O), Anthropologie clothing chain owner Urban Outfitters Inc (URBN.O) and organic retailer Whole Foods Market Inc (WFM.O), were also down anywhere from almost 2 percent to more than 7 percent.
"Consumer confidence is down and this is despite a rebound in housing, falling gas prices. Consumers are very cautious right now," Ken Perkins, president of research firm Retail Metrics, told Reuters.
Denver-based Chipotle relies on diners' willingness to pay premium prices for its food made with organic produce and antibiotic-free meats. Its shares have soared since going public in 2006, due to rapid growth and sales trends that lately have defied the malaise in the U.S. economy.
"Our hypothesis going into quarterly results had been that Chipotle would be one of few companies to buck a broader restaurant slowdown this quarter," William Blair & Co analyst Sharon Zackfia, said.
But Chipotle's stock - which debuted at $22 and hit an all-time high of more than $442 in April - plunged 21.5 percent to close at $316.98 on Friday, making it the biggest percentage loser on the New York Stock Exchange.
Chipotle was also Friday's biggest decliner on the S&P 500 Consumer Discretionary Index .GSPD, which fell more than 1 percent on Friday but remains up over 12 percent year-to-date.
Consumer spending was healthy during the first quarter of the year, when mild winter weather lured people to stores and restaurants and prompted companies to add jobs earlier than usual.
But that shift led to a second-quarter hangover, marked by stalled job growth and softer consumer spending.
"I think the second quarter will be the worst quarter this year — the weather in Q1 took business out of Q2," said retail consultant Jan Kniffen, of retail consulting and equity research firm J. Rogers Kniffen Worldwide Enterprises.
Compounding concern, consumer confidence declines have been greater for consumers making more than $50,000 over the past two months, Zackfia said.
Chipotle on Thursday said second-quarter sales at restaurants open at least 13 months rose a healthy 8 percent, but fell short of the 10 percent gain analysts expected.
Company brass said those sales decelerated in late April and continued through May and June.
"It's a squeezed consumer," said Malcolm Knapp, whose Knapp-Track monthly sales and guest count data is a restaurant industry benchmark. "If they spend a lot on retail, they spend less on restaurants. They can't do everything."
Whole Foods, which has taken well-heeled and health-conscious shoppers from more mainstream supermarket chains, is another company that has been posting robust growth despite the bumpy U.S. economic recovery.
Analyst Zackfia said Chipotle's sales miss "does create incrementally greater caution in our minds about whether the softening macro environment could weigh on Whole Foods' business."
Investors will find out next week when Whole Foods reports quarterly results. Meanwhile, shares of the retailer closed down 7.2 percent at $84.03 on the Nasdaq - where they hit an all-time high of more than $97 in late June.
(Reporting By Lisa Baertlein in Los Angeles)