By Granth Vanaik and Waylon Cunningham

July 24 (Reuters) - Chipotle Mexican Grill ( CMG )

surpassed Wall Street estimates for quarterly sales and profit

on Wednesday as demand for its rice bowls and burritos held up

even as prices increased.

Shares of the company pared early after-hour gains but were

still 2% higher after executives said Chipotle expects margins

to be under pressure for the next couple of quarters.

The company's restaurant-level operating margin rose to

28.9% from 27.5% a year ago. It said it expects margins to be

around 25% in the third quarter.

Chipotle also said on Wednesday it would buy back $400

million worth stock.

The California-based chain has been able to buck a larger

slowdown in customer traffic within the U.S. restaurant

industry, partly because Chipotle's loyal customers kept

returning to its outlets despite inflation straining household

budgets.

"The second quarter was outstanding as successful brand

marketing, including the return of Chicken al Pastor, drove

strong demand to our restaurants," CEO Brian Niccol said,

referring to one of the chain's burrito bowl options.

The company recorded foot traffic growth of about 17% during

the quarter, outperforming the wider fast-food and quick service

restaurant category's traffic increase of only 0.63%, according

to Placer.ai.

Chipotle's comparable sales rose 11.1% in the second

quarter, compared with analysts' average estimate for a 9%

increase, according to LSEG data.

Adjusted profit of 34 cents per share beat analysts'

expectations by 2 cents.

The company has benefited from incremental menu price hikes

intended to offset the high costs associated with raw materials

and labor. In April, it undertook a 6% to 7% menu price increase

in California after a law boosted the minimum wage for fast-food

workers to $20 an hour.

"While many restaurants are struggling, Chipotle continues

to beat expectations because consumers see it as a good value,"

Emarketer analyst Zak Stambor said.

The upbeat results come just weeks after Chipotle's shares

began trading on the New York Stock Exchange following a

50-for-1 split of its common stock that the restaurant chain's

shareholders approved on June 6.

It continues to expect comparable restaurant sales growth in

the mid-to-high single-digit percentage for 2024.