Chipotle Mexican Grill, Inc. (CMG) on Q1 2023 Results - Earnings Call Transcript

Operator: Hello, and welcome to the Chipotle Mexican Grill First Quarter 2023 Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Head of Investor Relations and Strategy, Cindy Olsen. Cindy, please go ahead. Cindy Olsen: Hello, everyone, and welcome to our first quarter fiscal 2023 call -- earnings call. By now, you should have access to our earnings press release. If not, it may be found on our Investor Relations website at ir.chipotle.com. I will begin by reminding you that certain statements and projections made in this presentation about our future business and financial results constitute forward-looking statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements. Please see the risk factors contained in our Annual Report on Form 10-K and in our Form 10-Q for a discussion of risks that may cause our actual results to vary from these forward-looking statements. Our discussion today will include non-GAAP financial measures. A reconciliation to GAAP measures can be found via the link included on the presentation page within the Investor Relations section of our website. We will start today's call with prepared remarks from Brian Niccol, Chairman and Chief Executive Officer; and Jack Hartung, Chief Financial and Administrative Officer, after which we will take your questions. Our entire Executive leadership team is available during the Q&A session. And with that, I'll turn the call over to Brian. Brian Niccol: Thanks, Cindy, and good afternoon, everyone. 2023 is off to a great start with first quarter sales and margins ahead of our expectations. For the quarter, sales grew 17% to reach $2.4 billion, driven by a 10.9% comp. In-store sales grew by 23% over last year. Digital sales represented 39% of sales. Restaurant level margin was 25.6%, an increase of 490 basis points year-over-year. Diluted EPS was $10.50, representing 84% growth over last year. And we opened 41 new restaurants, including 34 Chipotlanes. These results demonstrate that our focus on running great restaurants with exceptional food and exceptional people is driving performance. Additionally, we benefited from exciting new menu innovations including Fajita Quesadilla and Chicken al Pastor. Transaction trends were positive throughout the quarter and the strength has continued into April. I would like to note that beginning this quarter, we are returning to our pre-COVID practice of providing annual comp guidance and anticipate comparable sales to be in the mid-to-high single-digit range for the full-year. We will also continue to provide quarterly comp guidance for the remainder of this year and anticipate second quarter comps in the mid-to-high single-digit range. Now, I would like to provide an update on our five key strategies that will position us to win today while we create the future, which include: number one, running successful restaurants with a people accountable culture that provides great food with integrity, while delivering exceptional in-restaurant and digital experiences. Number two, making the brand visible, relevant and loved to improve overall guest engagement. Number three, amplifying technology and innovation to drive growth and productivity in our restaurants and support centers. Number four, expanding access and convenience by accelerating new restaurant openings. And number five, sustaining world class people leadership by developing and retaining diverse talent at every level. First, starting with our restaurants. We recently held our Field Leader Conference, which included all Field Leaders, Team Directors’ and Regional Vice Presidents, as well as leaders from our restaurant support center. The message was clear. We are focused on developing exceptional people and preparing exceptional food. It was truly inspiring to see over 600 highly motivated leaders aligned to deliver Chipotle's standards of excellence and I'm proud of the progress our restaurant teams are making. We had another outstanding quarter for turnover, with both hourly and salary metrics being some of the best I've seen in five years. The stability of crew and managers and a return to shoulder-to-shoulder training is helping to translate Project Square One into results. As our teams are getting more experience, we are continuing to see improvements in each of the Project Square One focus areas, including throughput on the frontline, on-time and accuracy on the digital make line, being prepped and ready with our delicious food, and the overall customer experience. Specifically on throughput, while we are making progress, we see opportunities to do better. One area we are focused on is deployment on the front make line and the digital make line during peak periods. We have noticed that when the digital make line gets busy, our managers tend to pull a crew member from the frontline to help, which is impacting throughput. We are currently testing changes to the smarter pickup times logic based on different sales and deployment levels in several markets, and early results show that we are increasing throughput on the frontline and increasing on time on the digital make line without impacting sales. Leveraging our stage gate process, we will continue to fine-tune our testing before rolling it out in phases across our restaurants. We have also added an additional incentive for our teams as we recently rolled-out digital tipping across our restaurants as part of our ongoing effort to enhance our crew member benefits. This will enable our teams to be rewarded for their efforts in preparing delicious food and providing a great experience for our guests. Overall, our focus on being brilliant at the basics and reestablishing our standards of excellence is resonating well. Our teams love to be held to a high standard, because when you achieve it, you feel like you were part of a winning team with the ability to be rewarded through bonuses and growth within the organization. We are starting to feel this again in our culture and in our people. When operations are running better, it helps all other drivers of sales to perform better, such as menu innovation, which brings me to our brand. As we often discuss, we continue to look for ways for the Chipotle brand to be more visible, more relevant and more loved, and we had a couple of very exciting new menu innovations that did just that. We responded to a real-time opportunity to support our passionate TikTok fans, who wanted Fajita veggies and Chipotle honey vinaigrette as options for our digital exclusive Veggie Quesadilla. We worked with two popular TikTok food reviewers, who made the idea go viral at the start of the year and leveraged our strength in digital marketing and culinary to creating exciting new menu items utilizing all existing ingredients. The results have been outstanding. During the launch, we nearly doubled our Quesadilla business and had two of our top digital sales days of all time. We have decided to make this a permanent menu item as the addition of Fajitas to our Quesadilla along with dipping it in a combination of our Honey Vinaigrette and Sour Cream is really delicious. The best part is, that it is made of all existing ingredients which limits additional complexity in our restaurants and we continue to see incremental Quesadilla sales because of this launch. We also launched Chicken Al Pastor as a limited time offer. Al Pastor store has been gaining mass appeal in recent years and we tapped into these consumer trends to offer our own spicy spin on Al Pastor with our freshly grilled chicken. As we mentioned last quarter, this is also operationally simple to execute as it is our existing Adobo Chicken cooked on the plancha and then mixed in an Al Pastor marinate. This has allowed for an exciting new menu item, while still maintaining our focus on Project Square One. Additionally, this is the first time we have launched a new menu innovation globally, as it was rolled-out in the U.S., Canada and Europe. The launch has been a success, and early indications show that it is outperforming Pollo Asado, which was our most successful protein LTO ever. Turning to rewards. We now have 33 million rewards members and we saw a nice pickup in enrollments as we rolled out Freepotle, which was designed to deliver a strong value proposition and attract new members through our transaction-driving rewards program. Throughout the year, our members will receive 10 personalized free rewards ranging from a signup cloth, to a bag of chips, to a free fountain drink. In addition to driving enrollments, we also saw an increase in member engagement as Freepotle gained traction throughout the quarter. Shifting to amplifying technology and innovation. We continue to leverage technology to improve our in-restaurant and digital experiences. As we mentioned last quarter, we began testing a new grill to improve the overall cooking process for our chicken and steak. The grill is much faster, allows for more consistent execution, and maintains our high culinary standards as it cooks the chicken and steak to perfection with the same sear and char. The feedback from our teams and our guests has been tremendous and we are currently in the process of rolling out the grill to 10 additional restaurants as a part of further validation through our stage gate process. During the quarter, we also rolled out our advanced location-based technology for our app, which allows for a more seamless process for scanning rewards, as it prompts reward members to scan while they are waiting in line. This has resulted in more rewards members scanning for points in our restaurants, which drives further engagement in our rewards program. For digital orders, it also alerts app users when it appears they are ordering from or heading to the wrong location, as one of our most frequent refund request is due to guest arriving at the wrong restaurant. Since rolling out this feature, we have seen a meaningful reduction in those refunds. We are also investing in technology and innovation through our Cultivate Next Fund to help us scale and advance our Food with Integrity mission. We recently announced two new investments, including Local Line and Zero Acre Farms. Local Line is a leading local food sourcing platform connecting local producers with buyers and helping them digitize their operations and sell products. We believe Local Line will help Chipotle increase the amount of local food for our 3,200 restaurants. And Zero Acre Farms is a food company that is focused on healthy, sustainable cooking oils made by fermentation that are more environmentally-friendly. Additionally, we recently announced our new Responsible Restaurant Design, which includes features like rooftop solar panels, all electrical equipment and systems, LED lighting, Cactus leather chairs, and electrical vehicle charging stations at select locations. While the pilot will go through the normal stage gate process, we believe it will enable us to take successful elements and incorporate them into future restaurant formats. These investments and initiatives will help to further our purpose of cultivating a better world and reflects our commitment to inspire real sustainable change with a potential impact far beyond our Company. And this brings me to expanding access convenience with a long-term target of 7,000 restaurants in North America. We remain on-track to grow new restaurants 8% to 10% per year for the foreseeable future, with at least 80% including a Chipotlane. The expansion of Chipotlanes adds additional convenience by adding our unique order pickup channel, which comes with a larger digital penetration driven by the order-ahead business. In Canada, we opened our first Chipotlane in Ontario and we also expanded access and convenience with our recently-announced partnership with SkipTheDishes, which is Canada's largest food delivery network. Finally, new openings in small towns continue to be a success, with the recent opening of a restaurant in a small town in California that had the second-highest opening day sales ever. In fact, within the last year, we had our top five openings in the Company's history, of which four were in small towns. I'll turn now to sustaining world-class people leadership by developing and retaining diverse talent at every level. Our recent Field Leader Conference was a time to celebrate the achievements and career progression of our teams and I'm always amazed by all the inspiring stories of our leaders. In fact, one of our Field Leaders from the Arizona sub region, who won the award for best throughput has been with Chipotle for 20-years. She is clearly doing a terrific job leading her patch of restaurants. However, what is even more incredible is that she has two sisters, one a Team Director, who has been with Chipotle for 24-years and is consistently a top performer in her region. And the other is a recently promoted Field Leader who has been with Chipotle for 18-years. Each has a unique story, but all three sisters started as crew members and said that Chipotle changed their lives for the better and gave them the ability to develop and grow others within the organization. When you combine our industry-leading benefits with our tremendous growth, performance culture, and then layer on top exceptional leaders, who will help to grow and develop our future leaders, Chipotle really is a special Company. In closing, I want to thank our restaurant and support center teams for all their hard work in delivering a great quarter. Our focus on getting back to the basics and reestablishing Chipotle's Standard of Excellence is beginning to drive strong results. We will continue to develop exceptional people and prepare exceptional food and of course treasure our guests. In doing this, I strongly believe we can make Chipotle better than ever. With that, I will turn it over to Jack. Jack Hartung: Thanks, Brian, and good afternoon, everyone. Sales in the first quarter grew 17% year-over-year to reach $2.4 billion as comp sales grew 10.9%. Restaurant-level margin of 25.6% increased about 490 basis points, compared to last year. Relative to our guidance, restaurant-level margin benefited from leverage from higher sales, labor efficiencies and lower avocado prices. Earnings per share was $10.50, representing 84% year-over-year growth. The first quarter did not have any material unusual expenses or our GAAP earnings and non-GAAP earnings are the same. As Brian mentioned, we are going back to our pre-COVID practice of providing annual comp guidance. We anticipate comps in the mid-to-high single-digit range for the full-year, assuming we do not see further deterioration in the macro environment. As a reminder, for Q2 and the full-year, our comp stepped down when we lapped the menu price increase we took in late March of last year, and we anticipate comps will step down again when we lap the menu price increase we took in early August of last year. We'll continue to provide quarterly comp guidance for the remainder of this year and we anticipate comps in the second quarter in the mid-to-high single-digit range as the transaction trends for the first quarter has continued into April. I'll now go through the key P&L line items, beginning with cost of sales. Cost of sales in the quarter were 29.2%, a decrease of about 180 basis points from last year. The benefit from last year's menu price increases and lower avocado prices more than offset a mixed headwind from the Garlic Guajillo Steak limited time offer which ended in mid-February, as well as higher prices across several items including queso, beans, rice, salsa and tortilla. For Q2, we expect our cost of sales to remain in low 29% range. The mix benefit from the Chicken Al Pastor limited time offer and lower dairy costs will be offset by higher costs in other areas, most notably avocados. We anticipate avocados to increase from the current favorable levels, which are some of the seasonally lows we have seen in the past few years. Labor costs for the quarter were 24.6%, a decrease of about 170 basis points from last year. The benefit from sales leverage was partially offset by wage inflation. For Q2, we expect our labor cost to remain in the mid-24% range as continued labor inflation will be offset by leverage from seasonally higher sales. Other operating costs for the quarter were 15.3%, a decrease of about 110 basis points from last year. This decrease was driven by sales leverage and a decline in delivery expenses due to lower delivery sales, partially offset by higher costs across several expenses, including natural gas and maintenance and repairs. Marketing and promo costs for the quarter were 3.2% and in Q2 we expect marketing costs to step down to the mid-2% range, with the full-year to come in right around 3%. In Q2, other operating costs are expected to be in the low 14% range. G&A for the quarter was $148 million, which includes $119 million in underlying G&A, $19 million related to non-cash stock compensation and $10 million, primarily related to payroll taxes and equity vesting and exercises, higher performance-based accruals, and costs associated with our Field Leader Conference. We expect our underlying G&A to be around $122 million in Q2 and continue to grow slightly thereafter as we make investments in technology and people to support ongoing growth. We anticipate stock comp will be around $22 million in Q2, although this amount could move up or down based on our performance. We also expect to recognize about $4 million related to performance-based bonus accruals and payroll taxes and equity vesting exercises, bringing our anticipated total G&A in Q2 to around $148 million. Depreciation for the quarter was $77 million or 3.2% of sales. And we expect depreciation to increase slightly each quarter as we continue to open more restaurants. Asset retirement stepped up to $8.4 million in the quarter. This includes charges related to the replacement of equipment such as fryers, grills, rice cookers and other restaurant equipment as we have been more proactive under Project Square One in preventing ingredient outages. In the near-term, we expect asset retirements to remain around this level as we continue to prioritize the guest experience and focus on great ops. Our effective tax rate for Q1 was 22.5%, which benefited from option exercise and share vesting and stock prices above the grant values. We continue to estimate our underlying effective tax rate will be in the 25% to 27% range, though it may vary each quarter based on discrete items. Our balance sheet remains strong as we ended the quarter with nearly $1.5 billion in cash, restricted cash and investments, with no debt, along with a $500 million untapped revolver. During the first quarter, we repurchased $132 million of our stock at an average price of $1,553. We increased our level of stock repurchases during the quarter when our share price fell with the overall market and we'll continue to opportunistically repurchase our stock. At the end of the quarter, we had $282 million remaining under our share authorization program. We opened 41 new restaurants in the quarter, of which 34 had a Chipotlane and we remain on-track to open between 255 and 285 new restaurants this year, with least 80% including a Chipotlane. We continue to experience challenges including utility installation, component and raw material shortages, and permitting and inspection delays, which have extended our development timeline. And while we anticipate these challenges to persist throughout the year, our pipeline remains strong and we expect to move toward the high-end of the 8% to 10% of openings range once these timeline challenges subside. In closing, 2023 is off to a great start as our focus on strong operations and treasuring our guests is driving an improvement in sales and margin trends. While we are proud of the progress our teams have made in a short period of time, we recognize that there is still opportunity for us to be even better. We believe that these efforts will position us to successfully navigate through macro uncertainty and more importantly, strengthen our foundation for sustained long-term growth. With that, we're happy to take your questions. Operator: We will now begin the question and answer session. Today's first question comes from Dennis Geiger with UBS. Please go ahead. Dennis Geiger: Great. Thank you and congrats on the strong results. Brian, I want to ask a little bit more about throughput and the operations opportunity. Could you all frame up a little bit more some of the gains that maybe you're starting to see over this past quarter from Project Square One and some of the other initiatives that you spoke to? And then kind of more importantly, just thinking about the opportunity from here based on initiatives currently in place and maybe even some of the technology you guys have highlighted in recent months? Thank you. Brian Niccol: Yes. So look, Project Square One has been something we've been working very aggressively for probably, I guess now we're going on almost nine months and our operators have done a terrific job. Scott and the team have really, I think, retrenched on getting back to the basics. And some of things where we make great progress on are just being in-stock with great culinary. We're experiencing too many times where we're out of guac, we were out of chips, we were out of chicken, so we've made tremendous progress on that front. We also have made a lot of progress on keeping both lines open from open to close. And both of those reasons that we've improved dramatically are driven by I think more stability in the restaurant with better training and then holding people accountable to those standards. On the throughput side of things, we've made some progress on the frontline, we've definitely made some progress as it relates to being on time and accurate digitally, but we still believe there's a lot of room for improvement. I think you heard in our prepared remarks, we're still working through I would call it better deployment in managing during peaks. So that we service the DML business effectively without jeopardizing the service of the people that are right in front of us in the restaurant. So we still believe there's a lot of runway in front of us on great throughput. We won't get the great throughput though if we don't have great stability and great culinary having both lines open from open to close, and we've made tremendous progress on those foundational elements. So really proud of where the team has moved the organization, but I'm really optimistic about where they can get to. Dennis Geiger: Appreciate that, Brian. And then just a quick follow-up on that. Just some of the tech stuff that maybe is still a little bit early days. How exciting is that for you and what that can do either for throughput, as well as maybe some cost efficiencies as we think about the potential there? Brian Niccol: Yes, no thanks for the – thanks, I forgot to answer that part of your question. So thanks for the reminder. Look, tremendously excited, that's why we're investing in it, right. These clamshell grills that we're rolling into 10 restaurants now make the job easier, make the culinary better and make the culinary more consistently better. So that's a huge win for our customer and our employees. I think I've talked about this, it makes the cooking time dramatically go down. So chicken goes from 12, 13 minutes to two, three minutes and you get perfect sear, perfect char, just really delicious culinary. So that's a big unlock for us, because the grill position is one of the hardest positions to train. So we can make that job easier and then we also free up more space on the plancha, it just eliminates any potential bottleneck for our future growth. The other thing, it's a huge exciting one for us, it's a little further out, is Hyphen. We talked about this quite a bit, which is automating the digital make line. That will enable us to be even more accurate, I think probably get a little bit faster and I think give people more consistent experiences. So, all these things are driving towards hopefully better guest experiences, but also a better work environment for employees. And then, obviously with that, I think will be more efficient in both cases. So, really excited about both initiatives. Obviously, the clamshell grills are a little bit closer in. Hyphen is a little further out. And then we've got some other exciting initiatives on making our prep easier, right, frying chips or cutting and cleaning avocados. So, we're making a lot of investment and we're going to continue to experiment. Not all of it will work, but I'm confident having innovation in this space is a big unlock for our brand in the long-run. Dennis Geiger: Great. Thank you, Brian. Operator: The next question comes from David Tarantino with Baird. Please go ahead. David Tarantino: Hi, good afternoon. Jack, I have a question on the margin outlook. I think based on your guidance for the second quarter and what you delivered in the first quarter, it looks like maybe the business is doing about a 26% restaurant margin for the first-half of the year or at least that's what you expect. Is that the right run rate to think about for the year at the current sales levels or is there anything maybe on the horizon in the back-half that might I guess surprise one way or another? Jack Hartung: Yes, David. In the first half, you're thinking about it right. We definitely expect our margins to step-up from here. Q2 from a seasonal sales standpoint is a stronger quarter for us. We typically see higher margins in the second quarter. We also have relatively lower marketing in the second quarter and there is some offsets like, like a little bit of inflation in the labor line, but still you're thinking about it right for the first-half of the year. What's unknown in second-half of the year is inflation. We're still thinking there's going to be continued labor inflation in the mid-single-digit. And even though our commodity has been largely tame, where we've had some pluses and minuses that have largely offset each other. We think in the second-half of the year, there is still the possibility of inflation. For example, we don't necessarily expect, we'd love avocados to remain at this level for the rest of the year, but we're being realistic and thinking that may not happen. And there may still be inflation upbeat, we haven't seen it really yet in what we buy, but there is that possibility as well. So, it's really a wildcard about inflation up. Inflation is tame in the second-half of the year, that will obviously lead to even better margins in the second-half of the year, but I think you're thinking about it right. David Tarantino: Great. And then the follow-up is about your pricing philosophy, and I don't know if Brian or Jack, you want to take this one. But I guess how are you currently thinking about your pricing as you think about the inflation you just referenced and I think now that you've rolled over the pricing in April, you're running one of the lowest year-over-year price increases in the industry. So, just wondering how you're thinking about when you pull the lever on pricing again? Brian Niccol: Yes. Hey David, this is Brain. We're staying the course on our approach to pricing, which is, if we see inflation that warrants us needing to take additional pricing, we'll take it. I think we've now demonstrated we do have pricing power. We have a really strong brand and we don't want to be in front of the inflationary environment, but we also don't want to fall behind. So, the good news is, we're in a really strong position that when we're ready and we believe it's necessary to pull that pricing lever, we can and we continue to have a really strong brand to do it with. So, we have not made any definitive plans on pricing for the balance of the year, but we're going to stay the course on the approach we've taken over the last, I'd say 18, 24 months. David Tarantino: Great. Thank you very much. Operator: The next question is from Sara Senatore with Bank of America. Please go ahead. Sara Senatore: Thank you. A question on labor and then as a follow-up on loyalty. Can you maybe talk a little bit, labor was, I think, better than you had expected or we had anticipated certainly I was wondering if you could just talk, is that just because transaction growth was better. I don't know, if you can decompose the same-store sales for us. Is it the lower turnover? Just trying to understand where the improvement came from? And then a question on loyalty is you mentioned, kind of, improved sign-ups. I guess when I look at loyalty membership growth year-over-year, it looks like it's still kind of in that 20% range. Do you have any thoughts about how big that could be or what share of your unique customers, you're seeing members of loyalty. Just trying to understand like sort of the run rate for that as a comp driver. Thank you. John Hartung: Yes. Yes, I'll take the labor piece first, Sara. First of all, it was most of the benefit that we saw was sales driven in the quarter. We saw our transaction turn positive. We're still running menu price increase compared to last year and about a 10% range. So when you have that kind of a flow-through where transactions are flowing and menu prices are flowing as well. That was a significant benefit in the quarter. We did have some labor inflation, so that was an offset to it. And then we did see some efficiencies. So we did see, really, for the first time, the labor scheduling tool we put into place last year was really starting to pay off. And then the fourth thing I would just say is normally this time of the year as our sales begin to increase seasonally, that is the time where our labor tends to be more efficient. It tends to happen where the weather starts to get warmer, our sales start to grow and our managers are trying to keep up on the schedules, but they end up basically driving a little bit of efficiency. They always seem to be maybe a step or 2 behind. The good news is, as Brian mentioned, operationally, we feel like the restaurants ran really well, and we drove that additional labor efficiency. Sara Senatore: Thank you. And then just on loyalty? Brian Niccol: Yes, I can say on the loyalty, your question there, what we've definitely seen is we see people higher enrollments when we make it easier to be engaged in the digital system. So a couple of things happen, right? I mentioned this in my earlier remarks. The team improved your ability to redeem rewards by alerting you, so that you don't forget this can form. We also improved your ability to end up going to the right restaurant for your order, which was a big deal. That's one of the biggest misses we seem to have with customers where they didn't realize they were ordering from different restaurants than where they were intending to go. So those types of things make the engagement easier for people, which then they stay in the program. And now doing things like free Potle, Fajita Quesadilla, digital-only just attracts new people to come into that space. And that is what we want to do. We want to continue to have acquisition and then we want to dial up the personalization and make it super easy to stay active and engaged, because we know the more engaged you are it plays out in more purchase frequency and higher ticket. So we'd love to get $33 million to $40 million. I don't know where the ceiling is on this thing, but we're going to continue to push towards getting as many people involved and then work very hard to turn it into a very personalized program that keeps them engaged. Sara Senatore: Okay. Thank you very much. Operator: The next question comes from David Palmer with Evercore ISI. Please go ahead. David Palmer: Thanks. I wanted to double-click on that labor productivity stuff. In the past you've talked about the number of orders you could do in a 15 minute block during those peak hours in the front make line, could you give us a sense of where you are now and where you think that can go realistically over the next one or two years. And then what that would mean to your sales, if you got there? John Hartung: Yes. I mean, I'll cover a couple of stats and then Brian, you can add-on as needed. First of all, in terms of the first quarter, we did push past our 15 minute max, compared to last year. So, it was nice to see as our transactions turned positive during the quarter, that we did push past last year. We actually at the end of the quarter and as we moved into April, we actually push past where we were in the second quarter of last year as well. So, we're seeing nice progress, but we're still in that low 20%s range, David. We think we can get into the mid-20%s. Mid-20% is comparable to what we were doing in 2019, before the pandemic, if you adjust for the shift in our digital business. But beyond that, if you go back even a few years before that, we don't think there's any reason why we can't get back into at least the high 20s or maybe even into the low 30s as well. Now that will take a few years, but we think that's one project that Brian mentioned, his idea of experimenting with, how can we make sure that we've got basically the labor deployment and we've got the cadence of orders coming through to the DML, to be set such that our teams can with confidence, they can run both lines without feeling this pressure to pull from one line to the other. And typically what happened is the DML, if the orders are coming through pretty high on the DML, there is a tendency to pull somebody from that frontline and I think we're basically seeing some good early results to tell us that we think there's going to be a way to breakthrough and allow our teams to really execute it out at a really high-level on both lines. So, I think that's potentially and a lot to get to some of these higher number 15 minutes throughput figures. David Palmer: And if I look back a decade, you're your labor as a percentage of sales was in the 23% area. I know a lot's changed in the labor market since then, but you're working on a lot of stuff, not just the focus and the training, but also the double-side grills and hopefully some breakthroughs with hyphen. I mean do you think you could get back there? Is that the sort of labor productivity that's possible that you can imagine over the next few years? John Hartung: It's theoretically possible. I think the one thing, David, that is different now is labor rates are much, much, much higher. And our menu pricing hasn't really stayed caught up all the way with the labor over the last few years. And in fact, the biggest move that we made in the second quarter of 2021, we basically raised wages by 15% and only a raised price by 4%. So we basically offset the dollar value of that. We didn't try to protect the margins and certainly didn't try to protect the labor line at all. So I think there's been a bit of a dislocation there. Having said that, we do have a very efficient labor model. We do have a lot of investment in technology. We do have a lot of things that I could see over time as we grow to $3 million volumes and then $3.5 million volumes. And as we really create solutions so that our teams can be more efficient. I think it's certainly possible. It's not necessarily a goal of ours, but we could land there someday. David Palmer: Thank you. Operator: The next question comes from Lauren Silberman with Credit Suisse. Please go ahead. Lauren Silberman: Thank you very much. My question is on transaction, great to see the positive transactions in the quarter. Within the mid-single to high single-digit comp guide for the year, what are you embedding for transactions? And what do you see as the most meaningful drivers of positive traffic growth through the rest of the year? Brian Niccol: Yes. Look, I think the drivers for traffic growth are going to start with Project Square One. We have to have great operational execution. We staff trained, deployed, lines open from open to close and giving people great experiences. So that's initiative number one, to keep the traffic moving in the right direction. Obviously, doing things with our loyalty program, our CRM database. We continue to talk about how we're on that journey of continuing to engage with our customers at another level and we'll continue to invest in there, continue to experiment and continue to execute. And then as I've talked about these in our strategies, having the brand visible for what makes Chipotle truly unique its purpose around food with integrity. That resonates with our customers. It resonates with our team members, because it's -- our employees feel great about the food they're serving and our customers. This is the food they want to be eating. And a great example of that are just some menu innovation things that we've added, right, the Fajita Quesadilla. Right now, we're doing Chicken Al Pastor. We made the Fajita Quesadilla program permanent. And we'll continue to do menu news. I think we've talked about this one or two a year. So it's the combination of all those things. that will continue, I think, drive great traffic. And I don't want to walk past the fact that we continue to have tremendous value scores. When you look at what you get from Chipotle for what you pay relative to your alternatives. We continue to get feedback that we're one of the best. And whether you're comparing to other restaurants in our space or even the grocery store. So we love our value position, and then we love the initiatives that we've got in place. Lauren Silberman: Great. And just a follow-up on traffic. Where is it coming from? Is it primarily your existing customers, new or lapsed customers, anything notable to share in terms of what you're seeing across income cohorts? Thank you very much. Brian Niccol: Yes. I mean, formally, it's broad-based. So we're seeing new customers come in, and we're also seeing existing customers increase their frequency. So the operational focus, combined with kind of the marketing and menu innovation is doing exactly what we would want it to do. Lauren Silberman: Thank you very much. Operator: The next question comes from Andrew Charles with TD Cowen. Please go ahead. Andrew Charles: Great. Thanks. Brian, would you be able to talk a little more about what you attribute the sales strength in March and April 2 that exceeded your guidance at the time when the fast casual industry slowed? If you had to tease it out, just -- not looking for specific numbers, of course, but just direction of magnitude. Is it the improved staffing, wasn't Chicken Al Pastor, something else that perhaps externally, we may not be appreciating? Brian Niccol: Look, I hate to just kind of repeat myself, but I'm going to repeat myself here, which is Project Square One and getting the foundational elements of Chipotle's execution back to Chipotle standard of excellence. I can't emphasize enough how important that is to have our digital make line open from open to close to have ingredients on that line from open to close, to being staffed and trained on the front line, so to get people down the line really fast with exactly what they want. I can't emphasize enough how important that is because everything then builds from there, right? Our digital personalization program builds on that. Our menu innovation builds on that, talking about a brand with purpose builds on that. And I just think a myriad of things worked really well. The Fajita Quesadilla program was received really well. The Chicken Al Pastor program was received really well. But I know they wouldn't be as powerful if we didn't have Project Square One driving behind it. So I think we've talked about this a lot, Andrew. One of the things that makes Chipotle really special is its operational ability to achieve tremendous throughput with unbelievable culinary and unbelievable customization. We got to nail that. And we have to nail it both on the front line and in the digital experience. Andrew Charles: That's helpful. And one thing I wanted to revisit as well as just the international opportunity. Obviously, a lot of the focus in the last five years has been domestically and recognizing how much strength you guys have domestically, as well as opportunities to further spread the domestic momentum and further enhance the divest momentum, what do you need to see to lean in more on international, whether it's accelerating development, you're entering new markets, potentially testing out franchising? I would love your thoughts as we think broader beyond Canada. Brian Niccol: Yes, sure. Well, I don't want to just walk by Canada. We're getting ready to expand into Alberta. We'll open probably 10-plus restaurants up there, which is like a 50% increase. So not and the team in Canada are doing a fabulous job. We're going to continue to drive that market. Specifically on Europe, Jim and the team have done a great job. Our U.K. business has got great momentum. Not surprising, there's a lot of inflation in the P&L there. and we have not priced for it because we think a lot of it is temporary, and we're still establishing ourselves in those markets. And I'm optimistic because if you can get the top line, usually, the rest worked itself out. And we're putting in place the digital system, the operational excellence, the great culinary. So I'm optimistic we're going to get there where we'll move this thing out of the stage gate process, but we're going to take our time, because we want to get it right. We don't want to just be fast. And that's what the team is after, and they're making great progress. Andrew Charles: Appreciate it. Thanks for the help. Operator: The next question comes from John Ivankoe with JPMorgan. Please go ahead. John Ivankoe: Hi, thank you. I was hoping that if you could give a little bit more transparency in terms of especially the month of April, what's happening on the customer cohort level? I mean, are you seeing more higher-income customers come? Are you seeing some lower income customers maybe coming a little bit less or changing their order patterns? Some people would say maybe attach is a little bit lower than it used to be or the consumer is becoming a little bit more price sensitive, but clearly, that wouldn't be the case in the traffic numbers that you've talked about in April similar to the first quarter. So just wanted to -- just get a sense if there's anything kind of happening beneath the surface that you can talk about or maybe some shifting customer behaviors that actually might be positive for you longer term? Brian Niccol: Yes. It's actually two things happened for us. One, the higher income consumer continue to come and hardly came at a little bit faster pace from a frequency standpoint. And then we did see some, I would call it, recovery in the lower income consumer, still not all the way back to where it was, call it, a year ago, but an improvement from where it was over the last six months. So we've seen nice improvements across all of our income cohorts, and we continue to see great strength in the higher income. John Ivankoe: Interesting. And secondly, if I may, in terms of personalization on Chipotle Rewards, where are we in that journey? I mean, how do you feel that you're doing, are there any near-term opportunities or some near-term functionalities that you're going to add as the system continues to learn and get better on an individual customer basis. Brian Niccol: Yes. Thanks for the question. This, I think, is a big opportunity for us because we're still very much in the early days on this. I think the teams have done a great job of turning the data into action through, call it, like CRM programs. And we're just starting to tip our toe into the personalization opportunity. And I think you're going to see really kind of CRM evolve into personalization at meaningful scale. So I think there's a lot of opportunity to be had in this space. I'm proud of the work that's been done to-date and where we currently are. But I just think there is tremendous opportunity going forward. assuming we can get this personalization program, right? John Ivankoe: Thank you. Operator: The next question comes from Brian Harbour with Morgan Stanley. Please go ahead. Brian Harbour: Yes, thank you. Good afternoon. In the past, you've commented just on kind of delivery sales and what that looks like for the quarter? And then maybe also just kind of what the mix component of your same-store sales for the quarter was? Would you be able to provide some color on that? Brian Niccol: Delivery was still right around 20%, right? John Hartung: Like high teens. Brian Niccol: Yes, high teens. And we saw a nice strength in our digital business, a little bit of a rebound in the delivery business, more so probably in the marketplace. But we're feeling really good about how we're positioned in all those access channels. Order ahead, delivery and coming into the restaurant. Brian Harbour: Okay. And then seeing how the Fajita Quesadilla did quite well. Are there kind of other opportunities like that where you lean into just existing menu items and do something akin to that. You've obviously done very well with kind of protein LTOs, but what else could be further afield that kind of continues on that success? Brian Niccol: Yes. Look, we are really delighted by how well the Fajita Quesadilla performed for the very reason you just mentioned, right? It's all existing ingredients. It required some work on the digital side of things. But for the most part, this was a really easy one for operators to execute. So the team is doing some work to figure out other opportunities like that within our menu and maybe could apply for both the frontline and the digital line. I do believe there's still a lot of hidden gems within the Chipotle menu. And I think we have the opportunity to talk about them in a more visible way. So more to come. I know Chris and the team are working through, can we find something that can perform as well as Fajita Quesadilla following those kind of requirements. Brian Harbour: Thank you. Operator: The next question comes from Sharon Zackfia with William Blair. Please go ahead. Sharon Zackfia: Hey, good afternoon. I was hoping to get an update on Chipotlanes. I think around this time last year, you gave us some ROIC metrics on Chipotlanes versus non-Chipotlanes and kind of the sales lift and digital mix component. I'm just curious now that we're a year later, how those compare the Chipotlanes versus the non- Chipotlanes? And then Jack, did you actually give us kind of what mix and traffic were in the quarter, that would be helpful to have. Thank you. John Hartung: Well, I'll do the first one -- or the second one first. And I'm surprised it didn't get asked before. So no, we provide it. Sharon Zackfia: I just thought I space it out to Jack. John Hartung: We're almost not in Sharon. So yes, listen, transactions were in kind of that 4%-ish kind of mid, low-single-digit. It's a nice turnaround from what we saw in the fourth quarter that we saw a check the net check was 7%, so that gets you to that kind of 10.9%. And of the check, it was about 10% pricing and then a 3% mix. And just as a further clarification, the 10% pricing is about 8.5% is in our in-store and our order ahead business. And then on top of that, there's a 1.5% for delivery. And then on Chipotlane, Sharon, largely the same. I mean, Chipotlane still perform higher from a sales standpoint, higher from a margin standpoint and then higher from a return standpoint. I think we have mentioned in the past, it's -- the comparisons aren't as great anymore. So in other words, a few years ago, we would open up restaurants that could have a Chipotlane, but didn't as we were kind of executing the strategy. And today, when we have 80%, 85% of our restaurants have a Chipotlane, the 15% or 20% that don't can't have one, meaning it's an urban location, it's an in-line location. So it's really different trade areas. So we're starting to see that some of the sales comparisons are getting a little bit not necessarily relevant. We're still seeing the Chipotlanes perform at a higher level, but it's a little bit like comparing an apple to an orange, but still margin return and from a sales standpoint, they're still great. It still does generate higher digital mix by several hundred basis points, and there still is a shift where delivery takes a step down from something in the high teens into the mid or low teens, and order head steps up quite a bit from something in the call it the low 20% up to the high 20s or even the 30%. So all the same kind of directional thing that we've seen, all the benefits that we've seen with Chipotlane are continuing to show up. Sharon Zackfia: Thank you. Operator: The next question comes from Jon Tower with Citigroup. Please go ahead. Jon Tower: Great. Thanks for taking the question. Curious, Brian, you mentioned earlier in the call that your smaller market stores are coming in strong, perhaps even better than you had anticipated. So I'm curious, I know you've recently offered the 7,000-store TAM for North America. But given the success you're seeing as well as some of the new technology like the clamshell grills that you're still testing or you can heighten on the horizon, does that maybe alter that opportunity for new stores over time? Brian Niccol: I mean, look, obviously, as we get closer to that 7,000 number. We'll have a much better idea of whether or not we can grow beyond the 7,000. The good news is we've not seen any slowdown in our performance. So all the restaurants we're opening. They're opening with strength. And obviously, we look at this every year as we kind of take another look at our market planning. And the good news is we're opening restaurants in -- for Chipotle, I would say, somewhat penetrated markets, and they continue to perform really well. And that gives us confidence because then we can kind of start thinking through like, well, you start extrapolating that across the country, you could see how you could get beyond 7,000. But not ready to take the number up just yet. I love seeing great performance. It's great to see the small towns do really well. And it's great to see, frankly, the restaurants do really well in urban and are more penetrated markets. So lots of opportunity in front of us on new restaurant opening frontier. Jon Tower: Great. And just one more follow-up. Do you have any more planned LTOs for 2023? Brian Niccol: We always think through kind of something in the front half and something in the back half. We haven't definitively made a decision on what we're going to do in the back half yet. The good news is our pipeline is really strong, and we've got some flexibility. But we want to see where the consumer is, the strength of Project Square One and that will inform what we choose to do in the back half of the year. Jon Tower: Got it. Thank you. Operator: The next question comes from Peter Saleh with BTIG. Please go ahead. Peter Saleh: Great. Thanks for taking the question. Brian, I want to ask about the hyphen automation. I think you mentioned that's for the digital make line. When you're thinking about this, and I know it's still early, is this more for new restaurants? Or can you fit this into your existing footprint in some of your existing locations? Brian Niccol: Yes. No, one of the things that's great about this is it would fit in our existing locations. It's almost pull off the current line, put in the new line kind of idea, which is really exciting. Probably the first place you'd see us do it. It will be with new units just because it's easier to implement. But the good news is Kurt and the team are designing this so that it will work with our existing restaurants. Peter Saleh: Great. And then just one question on the Chicken Al Pastore LTO. It sounds like it's performed exceptionally well. Is it bringing in new guests to the brand previously haven't come to Chipotle? And is there a level at which an LTO has so much success that it becomes a permanent item? Or do you always consider it as an LTO? Brian Niccol: Yes. Well, the good news is Chicken Al Pastore has been broadly appealing. So both to new users and existing customers. The decision to make it permanent would be something we would do after we finish this LTO 1. So we haven't come to the conclusion that we would make this permanent, but your statement is correct, it's definitely performing really well. And crew member feedback is this is an easy one for them to make, and customer feedback has been really positive as well. So we did decide to make the Fajita Quesadilla permanent in our digital platform, but that's a little different than making Chicken Al Pastore permanent. So for this one, it's definitely planned to be an LTO, we'll execute it as an LTO, and then we can always revisit whether we make a permanent menu item down the road. Peter Saleh: Thank you. Operator: The next question comes from Jeffrey Bernstein with Barclays. Please go ahead. Jeffrey Bernstein: Great. Thank you very much. Two questions. The first one is on the comp guidance. The fact that you're resuming guidance for full-year. I assume that's an indication of stabilization that you're seeing maybe more week-to-week or month-to-month or your visibility -- just wondering if you can share why that has returned. And maybe what are the components you're assuming in that mid to high-single-digit in the 2Q and full-year? Just trying to gauge what the pricing would be if you took no further and what the traffic assumption is? And then I just had one follow-up. John Hartung: Yes. On the guidance, it assumes we don't take any additional pricing similar to the comment that Brian made before. Right now, we're staying the course. So what it assumes is we continue the same transaction trends that we've seen in the first quarter continue into second quarter. It recognizes that we took some menu price action last year, and those will roll off. And so that's, in essence, what we put together for the full-year guidance. And the idea here, Jeff, is that we don't know if we're going to continue like beyond the next few quarters and give quarterly guidance all the time. You might remember a few years ago, we used to give just the annual and then not talked about what the quarterly guidance is. And so what we're doing right now is we're kind of doing both for a while, and then we'll see how the trends unfold. We'll see what happens to the macro. And we'll make a decision in terms of what our guidance is going to be. But we actually think about our business in terms of a longer-term approach than quarter-to-quarter. And so we think the guidance ought to match that as well. So that's the reason for the change. Jeffrey Bernstein: Understood. And then just on the marketing front, I think you said the mid-2% range for the second quarter. I know it was in the 3s in the first quarter. I'm just wondering, just talk about the thought process around marketing, whether this is a conscious pullback for any particular reason or how you measure the returns kind of your how happy have you been with the marketing you've had thus far and the outlook going forward? Thank you. Brian Niccol: Well, we've been really happy with how the brand has shown up and the initiatives that we've rolled out on the percentages, I think that has more to do with timing than anything else. John Hartung: It's timing. It's been planned, and we tend to spend more in the first quarter first part of the year and in the back half of the year and typically to support these LTOs. Brian Niccol: Well, I think Chris here, you'd also say too, like the summer months aren't the best time for broad-based media, right? So I think that's part of the timing. Peter Saleh: Thank you. Operator: Today's last question comes from Jake Bartlett with Truist Securities. Please go ahead. Jake Bartlett: Great. Thank you so much for taking the question. Jack, I had a question on commodity inflation. I was wondering whether you could kind of handicap the likelihood of deflation in the back half. It feels like there's some big chunks of poultry dairy seem to be likely solidly deflationary. Just kind of wondering what the moving pieces are in your mind, how much visibility you have? And just what do you think the chances of deflation are in the back half? John Hartung: Yes. It's not our -- it's a good question. It's not our base case. Our base case is to see modest inflation in the back half of the year. We're predicting somewhere in the low to mid-single-digits. We've been really pleasantly surprised by what's happened so far. We have had a number of miscellaneous items where we've seen inflation like some of our oils tortilla, some of our sauces and things like that, but even offset by lower-than-expected avocado cost. So that's why our food cost has been steady for two quarters in a row. And it's been a number of quarters that that's happened where we haven't seen any net inflation. So I do think it's a possibility. It depends on what the Fed does. It depends on what happens to inflation broadly. The wildcard there is if inflation disappears, you have to also then wonder, okay, what's happened with the macro economy, what's happening with unemployment and consumer demand as well. So right now, we kind of like the environment we're in right now, where consumers have jobs. They have money. They're visiting restaurants, and the inflation that we're seeing is pretty modest. So that base case that we put together and how we plan the rest of the year feels pretty good to us. We wouldn't mind inflation going down, but we'd love it if it didn't. Also be accompanied with a softness in demand. Jake Bartlett: Great. And that answer kind of flows into my next question, which was I think as you talked about the annual guidance for same-store sales, you talked about the macro environment staying as it is now. So I just wanted to kind of make sure I understood what your kind of base case is for the macro environment in the back half of the year. And should we think of the range kind of slight recession on the low end? How should we think about the macro outlook in your guidance? And maybe how you think you're positioned if we do see a deceleration in the consumer? John Hartung: So first of all, in our prepared comments, we did say our guidance assumes that there's not a meaningful change in the macro environment, okay? Because obviously, all bets are off that happens. But in terms of our outlook, our outlook does not -- our base case does not include a recession or certainly not a meaningful recession. Again, it looks like unemployment is holding up really well. It looks like consumer spending is strong right now. I mean, Brian mentioned our -- we saw softness in the second-half of last year, especially the fourth quarter in lower income consumer. We saw those consumers come back almost at the same rate as our higher income consumers. And so we see that as a positive in a positive macro sign. So we're cautiously optimistic about what's going to happen in the second half of the year. Now if there is a recession, we feel like we're really well prepared. We have -- we own all of our restaurants. We don't have any debt. So we don't have the possibility of franchisees under pressure if they have debt payments and that there is a softening of demand. And we don't feel like we have to run the business based on a quarter-by-quarter and tally. So if we need to write a couple of tough quarters here or there, we certainly think we have the financial wherewithal and we have the long-term view to do that. But again, we're cost optimistic that the economy will hold up. Jake Bartlett: Great. I appreciate it. John Hartung: Thank you. Operator: This concludes our question-and-answer session. I would like to turn the call back to Brian Niccol for any closing remarks. Brian Niccol: Okay. Thanks. And thanks, everybody, for joining the call and all the questions. Obviously, we're very proud of the work that has gone into achieving these results. I think I mentioned this before, Chipotle has got one of those special brands strengths when you look out there. There aren't many companies, I think, that are growing top line, expanding margins and building new units to the tune of 8% to 10%. And then when you combine that with the strength of the balance sheet, the strength of our economics, we're very confident in the strategies that we're continuing to execute we are not slowing down, though on Project Square One, and we're not slowing down on providing digital access, and we're not going to slow down on making the brand visible and loved. And at the foundation of all this when we have great people, with great culinary, we usually end up with great experiences for our guests. So we're staying the course, and we believe the strategies and these focus areas are going to deliver results for the long-term. And we're optimistic about our long-term future of getting to those 7,000 restaurants and AUVs well beyond 3 million. So thanks again for taking the time, and we'll talk to you in a couple of months, if not sooner. Thanks. Bye. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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Chipotle Mexican Grill, Inc. (CMG) Earnings Report Analysis

  • Earnings Per Share (EPS) Beat: Chipotle reported an EPS of $0.25, surpassing the Zacks Consensus Estimate.
  • Revenue Miss: Despite the EPS beat, Chipotle's revenue of $2.85 billion slightly missed the estimated figure.
  • Market Valuation Metrics: Chipotle's financial metrics, including a P/E ratio of 54.35 and a price-to-sales ratio of 7.32, highlight its market valuation.

Chipotle Mexican Grill, Inc. (NYSE:CMG) is a prominent player in the fast-casual dining sector, known for its focus on fresh ingredients and customizable menu options. Competing with other fast-casual chains like Qdoba and Moe's Southwest Grill, Chipotle has carved out a significant market share. The company operates numerous locations across the United States and internationally.

On February 4, 2025, Chipotle reported earnings per share (EPS) of $0.25, surpassing the Zacks Consensus Estimate of $0.24. This marks an improvement from the previous year's EPS of $0.21. Despite this positive earnings performance, the company's revenue of approximately $2.85 billion slightly missed the estimated figure, leading to a decline in its share price.

The market's reaction to Chipotle's earnings report underscores the importance of meeting revenue projections. As highlighted by Barrons, the shortfall in revenue has affected investor confidence, despite the earnings beat. Analysts attribute the disappointing sales figures to factors like tougher year-over-year comparisons, adverse weather conditions, and holiday timing.

Chipotle's financial metrics provide insight into its market valuation. The company has a price-to-earnings (P/E) ratio of 54.35, indicating that investors are willing to pay over 54 times its earnings. The price-to-sales ratio is 7.32, and the enterprise value to sales ratio is 7.67, reflecting the company's valuation relative to its sales.

The enterprise value to operating cash flow ratio stands at 45.67, showing the company's valuation in relation to its cash flow from operations. Chipotle's earnings yield is 1.84%, representing the return on investment for shareholders. With a debt-to-equity ratio of 1.24 and a current ratio of 1.62, Chipotle maintains a moderate level of debt and a healthy liquidity position.

Truist Reaffirms Buy Rating on Chipotle Following Recent CEO Appointment

Truist Securities analysts reiterated a Buy rating and $72.00 price target on Chipotle Mexican Grill (NYSE:CMG), viewing the recent appointment of Scott Boatwright as permanent CEO as a positive move for the company. Recognizing Chipotle as a fundamentally operations-focused business, the analysts see Boatwright’s experience as aligning well with the company’s strengths.

Chipotle’s appeal to consumers has remained steady, with a core menu that has largely been consistent since the company’s founding. Recent sales growth has been driven by factors such as seasonal menu innovations, increased digital sales, and stronger marketing efforts.

However, Truist believes Chipotle’s operational improvements have been the primary catalyst for its sustained recovery since its food-safety challenges in 2015-2016. Boatwright, who previously served as Chief Operating Officer since joining Chipotle in 2017, brings extensive experience in operational leadership from his 18-year tenure at Arby’s, where he last held the position of Senior Vice President of Operations.

CEO Brian Niccol's Transition from Chipotle to Starbucks: A Strategic Shift

  • Brian Niccol's move from Chipotle Mexican Grill (NYSE:CMG) to Starbucks marks a significant leadership transition, signaling new chapters for both companies.
  • Under Niccol's leadership, Chipotle showcased strong financial health with a quarterly revenue of approximately $2.97 billion, a net income of about $455.67 million, and a gross profit of roughly $775.84 million.
  • The strategic and operational successes at Chipotle under Niccol, including an operating income of $600.81 million and EBITDA of $684.37 million, provide insights into his potential impact on Starbucks.

Chipotle Mexican Grill (NYSE:CMG) has navigated through various challenges under the leadership of CEO Brian Niccol, demonstrating remarkable adaptability and resilience. Niccol, known for his transformative role at Chipotle, is making headlines with his recent move to Starbucks, trading Chipotle's signature barbacoa burritos for Starbucks' iconic Frappuccinos. This strategic shift not only highlights Niccol's versatility but also signals a new chapter for both Chipotle and Starbucks. The leadership change has sparked discussions about its potential impact, especially on Starbucks, which is expected to benefit from Niccol's proven track record at Chipotle.

Under Niccol's leadership, Chipotle reported a quarterly revenue of approximately $2.97 billion, showcasing the company's strong financial health and operational efficiency. The net income for the quarter stood at about $455.67 million, with a gross profit of roughly $775.84 million, indicating Chipotle's ability to maintain profitability and manage costs effectively. These financial metrics reflect the successful strategies implemented by Niccol, positioning Chipotle for sustained growth and stability.

The operating income reported at $600.81 million and EBITDA reaching $684.37 million further underline Chipotle's operational success. These figures demonstrate the company's robust operational management and efficient use of resources under Niccol's guidance. The earnings per share (EPS) for the quarter was $0.33, providing investors with a clear picture of Chipotle's earnings potential and financial health.

The cost of revenue for Chipotle during this period was about $2.20 billion, with income before tax at approximately $607.91 million, and the income tax expense for the quarter was $152.24 million. These financial details highlight Chipotle's effective cost management and tax planning strategies, essential components of the company's overall financial strategy. Under Niccol's leadership, Chipotle has not only navigated through challenges but also positioned itself for future growth, demonstrating the CEO's strategic foresight and adaptability.

As Brian Niccol transitions to his new role at Starbucks, the financial performance and strategic moves made during his tenure at Chipotle provide valuable insights into his potential impact on Starbucks. With Niccol's leadership experience and proven track record at Chipotle, Starbucks is poised to benefit from his strategic vision and operational expertise. This leadership change marks a significant transition for both companies, with the industry eagerly watching how Niccol's strategies will unfold in his new role.

Chipotle Shares Plunge Over 13% as CEO Brian Niccol Departs for Starbucks

Chipotle Mexican Grill (NYSE:CMG) experienced a sharp decline of over 13% intra-day today following the unexpected news that Brian Niccol, the company's Chairman and CEO, will be stepping down to take over as the new CEO of Starbucks.

Niccol, who joined Chipotle in 2018, has been widely recognized for spearheading a transformative turnaround at the fast-casual dining chain. His leadership saw significant improvements in the company’s operations, including a comprehensive technological revamp and strategic expansion initiatives. His departure has raised concerns among investors about the potential disruption to Chipotle's ongoing progress, fueling uncertainty about the company's future direction.

Chipotle's board has moved quickly to fill the leadership gap, appointing Scott Boatwright, the current Chief Operating Officer, as interim CEO. Boatwright, who has been with Chipotle for seven years, has played a key role in boosting operational efficiency and enhancing customer experience across the chain's more than 3,500 locations.

Chipotle Gains 2% on Strong Q2 Earnings and Margins

Chipotle Mexican Grill (NYSE:CMG) saw its shares surge by more than 2% in pre-market today following a strong second-quarter performance that exceeded Wall Street expectations, highlighted by an impressive earnings beat and a notable margin increase.

The fast-casual restaurant chain reported an adjusted EPS of $0.34, above the Street forecast of $0.32. Revenue also outperformed, reaching $3 billion compared to the projected $2.94 billion.

Year-over-year, revenue rose by 18.2%, driven by an 11.1% increase in comparable restaurant sales and a 32.0% jump in adjusted diluted earnings per share.

The growth in comparable sales was primarily due to an 8.7% increase in transactions and a 2.4% rise in the average check size. Digital sales remained a key contributor, making up 35.3% of the total food and beverage revenue.

Operating margins improved to 19.7%, up from 17.2% the previous year, while restaurant-level operating margins climbed to 28.9%, reflecting a 140-basis point improvement. This margin expansion highlights the positive impact of sales leverage despite facing challenges from wage and ingredient inflation.

Looking ahead to the full year 2024, management anticipates comparable restaurant sales growth in the mid to high-single digits and plans to open between 285 to 315 new restaurants, with over 80% featuring a Chipotlane.

Chipotle Mexican Grill, Inc. Stock Split: A Strategic Move to Broaden Investor Base

  • The Chipotle Mexican Grill, Inc. 1 for 50 stock split aims to make shares more accessible and affordable, potentially increasing liquidity and broadening the investor base.
  • Before the split, Chipotle's stock was trading at a high price, making it challenging for small investors to buy shares. The split is expected to lower the entry barrier.
  • The stock split reflects Chipotle's strong performance and investor confidence, with a significant increase in stock price and robust growth over the past year.

On June 26, 2024, Chipotle Mexican Grill, Inc. (NYSE:CMG) underwent a significant transformation in its stock structure through a 1 for 50 stock split. This adjustment altered the number of shares available to investors but maintained the overall value of their investments. Chipotle, known for its fast-casual Mexican cuisine, has been a standout performer in the restaurant industry, competing against giants like McDonald's and Taco Bell. This move is part of the company's strategy to make its shares more accessible to a wider range of investors.

The stock split reduced the price per share, making it more affordable for individual investors to buy into the company. Before the split, Chipotle's stock was trading at a high price, which could be out of reach for many small investors. By executing a 50-for-1 stock split, the company aimed to lower the entry barrier, allowing more people to invest in its shares. This strategy is expected to increase liquidity and potentially broaden the company's investor base.

The decision to undergo such a large stock split reflects Chipotle's strong performance and investor confidence. Prior to the split, the company's stock was trading at $3,283.04, showcasing a significant increase of 2.80% with a change of $89.30 in its stock price. The stock's performance over the past year, with a low of $1,768.64 and a high of $3,463.07, indicates robust growth and a solid market position. With a market capitalization of approximately $90.18 billion and a trading volume of 471,665 shares on the NYSE, Chipotle stands as a heavyweight in the industry.

The stock split is anticipated to enhance Chipotle's attractiveness to investors by offering shares at a more affordable price point. This move could lead to increased trading volume and potentially more dynamic price movements. By making the stock more accessible, Chipotle aims to attract a broader audience of investors, including those who might have been previously deterred by the high share price.

Overall, Chipotle's 50-for-1 stock split represents a strategic effort to democratize access to its shares and foster a more inclusive investor community. This initiative, coupled with the company's strong financial performance and market presence, positions Chipotle favorably for continued growth and investor interest.

Chipotle Mexican Grill's Strategic Stock Split and Its Implications

  • Chipotle Mexican Grill, Inc. announces a stock split to make shares more accessible to a broader investor base.
  • The company's stock price reaches a new year-high, reflecting strong financial performance and market confidence.
  • Chipotle's strategic initiatives aim to enhance liquidity, market visibility, and adapt to changing consumer preferences in the fast-casual dining sector.

Chipotle Mexican Grill, Inc. (NYSE:CMG) is a renowned fast-casual restaurant chain that specializes in tacos and Mission-style burritos. Founded in 1993, Chipotle has grown to become a major player in the restaurant industry, competing with other fast-casual dining establishments by emphasizing fresh, high-quality ingredients and customizable meals. The company's decision to undergo a stock split on June 26, 2024, where for every 1 share held, shareholders will receive 50 shares, is a strategic move aimed at making its stock more accessible to a broader investor base. This action reflects Chipotle's strong performance and its desire to continue expanding its shareholder community.

The stock split announcement comes at a time when Chipotle's stock price has seen significant growth, reaching a new year-high of $3,427.61, an increase of 1.85% or approximately $62.15. Trading between a low of $3,370 and a high of $3,463.07 on the day, the company's market capitalization has soared to about $94.15 billion. This impressive financial performance, coupled with a trading volume of 689,688 shares on the NYSE, highlights Chipotle's robust market presence and investor confidence in its business model and growth prospects.

The interest in Chipotle's financial health and the impact of consumer spending trends on the restaurant industry was further underscored by Nick Setyan's appearance on CNBC Television's 'Fast Money'. Discussing Chipotle's performance following its stock split, Setyan's analysis, although not fully detailed, points to the broader implications of consumer spending habits and their influence on the restaurant sector. This conversation, aired on June 18, 2024, reflects the keen market attention on Chipotle's ability to maintain its upward trajectory in the stock market post-split.

Chipotle's strategic initiatives, including the stock split, are set against a backdrop of changing consumer preferences and a competitive landscape. By making its stock more accessible, Chipotle aims to attract a wider range of investors, potentially enhancing its liquidity and market visibility. This move, coupled with the company's strong financial performance and market analysts' interest, positions Chipotle favorably in the eyes of both current and prospective investors.

Overall, Chipotle Mexican Grill's decision to undergo a stock split is a testament to its financial strength and commitment to shareholder inclusivity. With a significant increase in stock price and a solid market capitalization, Chipotle continues to demonstrate its resilience and appeal in the fast-casual dining sector. As the company navigates the post-split landscape, the focus will remain on its ability to sustain growth, adapt to consumer trends, and maintain its competitive edge in the industry.