Chipotle Mexican Grill, Inc. (CMG) on Q1 2022 Results - Earnings Call Transcript

Operator: Good day, and welcome to the Chipotle Mexican Grill First Quarter 2022 Results Conference Call. All participants will be in a 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 Adam Rymer, VP of Finance. Please go ahead. Adam Rymer: Hello, everyone, and welcome to our first quarter fiscal 2022 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 projected in the forward-looking statements. Please see the risk factors contained in our annual report on Form 10-K and our Form 10-Qs for a discussion of risks that may cause our actual results to vary from the 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 Officer, after which we will take your questions. Our entire executive leadership team is available during the Q&A session. And with that, I will turn the call over to Brian. Brian Niccol: Thanks, Adam, and good afternoon, everyone. Before I share our first quarter results, I want to express my gratitude for the 3,200 outstanding general managers and field leaders that attended our All Managers Conference in Las Vegas last month. It was our first time together in nearly four years, allowing us to celebrate our general managers as well as inspire and learn from one another as we codified our 2022 strategic priorities. It truly was great to be back together again. Chipotle's performance in the first quarter was strong despite challenges from the Omicron variant. For the quarter, sales grew 16% to reach $2 billion driven by a 9% comp, in-store sales grew by 33% over last year, digital represented 42% of sales, restaurant level margin was 20.7%, a decrease of 160 basis points year-over-year, adjusted diluted EPS was $5.70, representing 6.3% growth over last year and we opened 51 new restaurants, including 42 Chipotles. Although our restaurant margins remain bumpy due to inflation, we have the ability to be patient while costs are volatile, and the growth in pricing power to recover our margins over time. And I'm pleased to report that Q2 is also off to a strong start, fueled by Pollo Asado our most popular new protein to date. Our five key strategies continue to position us to win today while we create the future. These include: number one, running successful restaurants with a people accountable culture that provides great food with integrity, while delivering an exceptional in-restaurant and digital experiences; number two, sustaining world-class people leadership by developing and retaining diverse talent at every level; number three, making the brand visible, relevant and love to improve overall guest engagement; number four, amplifying technology and innovation to drive growth and productivity at our restaurants and support centers; and number five, expanding access and convenience by accelerating new restaurant openings. Let me provide a brief update on each of these strategies, starting with restaurant operations. Our people are our greatest asset and well trained and supported employees preparing delicious food served quickly equates to an excellent guest experience. We are currently focused on improving our throughput as our sales continue to increase throughout the spring, and our in-restaurant business continues to grow. Recently, I was in Denver at our 6th and Broadway location, which opened in March of 2000, and I met two employees who have been with this restaurant since the day it opened, so it's 22 years. They were training our new team members on line, demonstrating how to execute with excellence and speed. It was incredible to see our teach and taste Chipotle value being brought to life. We know throughput, a foundational element of convenience that our guests value is an opportunity for us, and we are committed to teaching, training and validating the five pillars of throughput every day during every shift to ensure we meet our high standards and provide a great guest experience. We have daily goals in place for the number of entrées per 15-minute period on the front make-line and promised time execution on the digital make-line. These goals are now included in the restaurant manager and crew bonuses to better drive performance and accountability, and both measures improved during the quarter. We are also in the process of rolling out a new scheduling tool, which will help ensure the right people are in the right positions at the right time. I believe that we are finally getting back to pre-pandemic operations, and I couldn't be more excited. We have been intentional in our recruiting efforts, and we have made investments in our people. We offer a world-class employee value proposition that includes industry-leading benefits attractive wages, specialized training and development, access to education and a transparent pathway to significant career advancement opportunities. We believe these efforts are helping to attract and retain great employees as our staffing levels are better today than they were in late 2019. We are constantly looking for ways to be better at training and development. With that in mind, we have enhanced our training and development programs, recently rolling out an AI-based learning management system, the Spice Up, which offers immersive learning and development opportunities and upskilling for future roles for all employees. We believe our team members of today will be our leaders tomorrow, and we are looking for them to grow with us. Opening 8% to 10% new restaurants per year means we need more crew, more GMs, more field leadership. In fact, team members can advance the restaurateur, the highest general manager position in as little as 3.5 years with average compensation of $100,000, while leading a multi-million dollar growing business. And it doesn't stop there. A GM can become a certified training manager, a field leader, a team director and a regional vice president. In fact, we just recently promoted an individual to regional vice president, who started as a crew member and he's the second one of our regional vice presidents to share this incredible career trajectory. Our marketing team continues to do a tremendous job of keeping Chipotle relevant in culture, driving difference as well as transactions. We continue to leverage both traditional and non-traditional media to increase awareness and amplify the brand. You may have seen our Knowing Tastes Better television campaign, which highlights Chipotle's real ingredients like antibiotic-free chicken, freshly prepared food like our hand-mashed guac and features our real team members. Additionally, we remain a leader in the digital space with our latest Chipotle metaverse experience that launched on National Burrito Day garnering more than 4 million game plays in the first week. From a product innovation standpoint, we generally introduce two to three new menu items per year using a disciplined stage gate approach to innovation. These new product introductions are extremely effective as they bring in additional customers, drive frequency with existing users and increase check while giving us an opportunity to create buzz around the brand. Pollo Asado was our first chicken innovation in 29 years. And the reaction has been outstanding. In addition to adding new variations to our health-oriented lifestyle bowls in January, we also attracted new guests with our plant-based chorizo limited time offering, which proved that you don't have to sacrifice flavor or food with integrity to enjoy a vegan or vegetarian protein. And we're far from being done. We've got an exciting new menu item that will start testing in the coming weeks, which I think guests are going to love. And we have a robust product pipeline for the remainder of 2022 and beyond. A key part of guest engagement is our Chipotle Rewards program, which now has nearly 28 million members. We recently celebrated the three year anniversary of the program by relaunching Guac Mode, an exclusive benefit for Chipotle Rewards members that unlocks access to surprise free guac rewards throughout the year, which resulted in our highest social engagement of all time and loyalty enrollments of 35% week-over-week. We continue to leverage our CRM sophistication by focusing more on personalization and using predictive modeling to trigger journeys that can influence guest behaviors as well as make their experience with Chipotle more relevant for them. This approach uses personalized messaging to learn more about an item, the guest has previously ordered, view their ordering preferences or to see their cumulative real food print, which is a guest potential environmental impact based on their order history. We are constantly learning, evolving, and optimizing to drive more frequency with rewards members. We are pleased with the progress to-date, but believe we will get even better over time. Our ability to share relevant, personalized communications with our guests will ultimately deepen the relationship between reward members and the brand. Our digital sales remain a big part of our business due to it being a convenient, frictionless experience that has been enhanced by continuous technology investments to improve operational execution. On average, it only takes about 10 minutes from the time a guest places an order until it's ready for pickup, which is simply outstanding. Chipotlanes also continue to outperform non-Chipotle locations due to the convenience, which is encouraging since digital order pickup is our highest margin transaction. We continue to look for ways to increase access and convenience through alternate restaurant formats, digital-only menu offerings and leveraging our large and growing loyalty program. As a people first company, we are investing in human capital technology to enhance the team member experience in our restaurants, creating a more efficient, consistent and compliant environment. We recently rolled out a new labor scheduling program as well as began testing radio frequency identification technology to enhance traceability and inventory systems. Also in test is an autonomous kitchen assistant, Chippy that integrates culinary traditions with artificial intelligence to make tortilla chips in our Cultivate Center Innovation hub. Our goal is to drive efficiencies through collaborative robotics that will enable Chipotle's team members to focus on other culinary tasks in the restaurant. We will not sacrifice quality and deliciousness. We are going to place Chippy in a Southern California restaurant soon we can leverage our stage gate process to listen, test and learn from our crew and guest feedback before deciding on our implementation strategy. To accelerate our strategic priorities, we recently announced that we created a new venture fund called Cultivate Next to make early stage investments into strategically aligned companies that further our mission. As a digital disruptor, we are looking to support early stage companies that are forward thinking and will enhance our employee or guest experience, advance our food with integrity mission and perhaps revolutionize the restaurant industry. Our last strategic pillar is to expand access in convenience, which today is still a top request from consumers. In less than 30 years, we reached 3,000 restaurants with over half in the last 10 years. We are relentless in our pursuit of bringing food with integrity to more communities. We're even halfway to our goal of reaching 7,000 restaurants in North America and are building a real estate pipeline that will accelerate new unit growth in the range of 8% to 10% per year, with more than 80% of new restaurants featuring a Chipotle. Our digital order drive-thru pickup line continues to be a favor among guests, giving customers more easy ways to access Chipotle. Last week, we issued Chipotle's 2021 sustainability report update, which highlights our commitment to people, food, and animal, and the environment. We've tied a portion of our executive compensation to achieving various goals, to ensure we've held ourselves accountable for making business decisions that cultivate a better world. The report talks about how we invested in our people, supported our communities and worked to reduce our environmental impact. I'm proud of the strides that we have made to showcase real meaningful action and measurable change. In closing, none of the results that I've shared with you today would be possible without our world-class teams. I want to thank our employees in the restaurants, field teams and support center staff for constantly pushing the boundaries of what's possible. As I mentioned at the start, we just brought together 3,200 of our general managers and field leaders and hearing their ideas, passion and enthusiasm for this company convinced me more than ever that we have the right people and the right strategies in place to position Chipotle for accelerated growth in the years ahead. With that, here's Jack to walk you through the financials. Jack Hartung: Thanks, Brian and good afternoon everyone. Sales in the first quarter grew 16% year-over-year to reach $2 billion as comp sales grew 9%. Restaurant level margin of 20.7% decreased 160 basis points compared to last year and earnings per share adjusted for unusual items was $5.70 representing 6.3% year-over-year growth. The first quarter had unusual expenses related to our previously disclosed 2018 performance share modification transformation cost as well as restaurant asset impairment and closure cost slightly offset by a reduction of legal expenses, which negatively impacted our earnings per share by $0.11, leading to GAAP EPS of $5.59. As we look to the remainder of 2022, the remains uncertainty from macroeconomic impacts as well as COVID and make it difficult to provide full year comp guidance. Comps in April so far have continued right around the same 9% we saw in Q1. And while it’s difficult to predict the comp in Q2 due to these factors, assuming current sales trends continue, we expect it to be in the 10% to 12% range as we expect the comp to increase throughout the quarter. Our restaurant level margins continue to be impacted by unprecedented levels of inflation. Our Q1 margin was impacted by a higher level of commodity inflation than we expected, primarily from avocados, tortillas and dairy resulting in our Q1 margin falling below the nearly 22% guidance we provided on our last earnings call. To offset these rising costs, we increased menu prices over 4% at the end of the quarter. And looking ahead to Q2, we expect our restaurant level margin to be around 25%, which will benefit from a full quarter of the new menu prices and assuming we don’t see additional inflation above our current estimates. I’ll now go through the key P&L line items beginning with costs of sales. Costs of sales in the quarter were 31% an increase of about 100 basis points from last year. Costs were higher across the board, but most notably beef, avocados and paper, and more than offset the leverage from our menu price increases. Additionally, cost for avocados, tortillas and dairy increased during the quarter. And in Q2, we expect our cost of sales to remain near 31% as the benefit from our menu price increase will be offset by a full quarter of these elevated costs. Labor costs for the quarter were 26.3% an increase of about 140 basis points from last year. This increase was driven by our decision to increase average wages to $15 per hour in May of last year, which is partially offset by menu price increases. In Q2, we expect our labor cost to be in the mid 24% range due to leverage from our menu price increase as well as seasonally higher sales. Other operating costs for the quarter were 16.4% a decrease of about 50 basis points from last year. This decrease was driven by menu price increases as well as the decline and delivery expenses, partially offset by higher costs across several expenses, most notably utilities, including natural gas. Marketing and promo costs for the quarter were 3.5%. The same level we spent last year to support a plant-based chorizo, as well as the launch of pollo asado. In Q2, we expect marketing costs to step down to the mid to high 2% range with the full year to remain around 3%. In Q2, other operating costs are expected to be in the mid 14% range. G&A for the quarter is $147 million on a GAAP basis or $144 million on a non-GAAP basis, excluding $3 million related to the previously disclosed modification through 2018 performance shares and $1 million related the transformation expenses offset by a $1 million reduction related to legal settlements. G&A also includes $101 million in underlying G&A, $20 million related to non-cash stock compensation, $6 million related to higher performance based bonus accruals and payroll taxes and equity vesting and exercises and $17 million related to our all-manager conference. We expect our G&A, underlying G&A to be around $104 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 likely be around $27 million in Q2, although this amount could move up or down based on our performance. We also expect to recognize about $5 million related to performance based bonus accruals and payroll taxes on equity vesting and exercises, bringing total G&A in Q2 to around $136 million. Depreciation step up in the quarter to $72 million as we accelerated depreciation for several in-store tech items we plan to upgrade this year, for example, adding contactless payment for our in-restaurant guests, as well as for remodels and relocations, that will expand our Chipotlane footprint. We expect depreciation to remain at an elevated level for the next few quarters. Our effective tax rate for Q1 was 16.7% for both GAAP and non-GAAP and both rates benefited from option exercises and share vesting at stock prices above their grant values. For fiscal 2022, we estimate our underlying effective tax rate will be in the 25% to 27% range, though it may vary based on discrete items. Our balance sheet remains healthy as we ended the quarter with $1.2 billion in cash, restricted cash and investments with no debt along with the $500 million untapped revolver. During the first quarter, we repurchased $260 million of our stock at an average price of $1,490. We increased our level of stock repurchases during the quarter when our share price fell with the market overall, and we’ll continue to opportunistically repurchase our stock. We opened 51 new restaurants in the first quarter of which 42 had a Chipotlane. The performance of our Chipotlanes continues to be strong driving our new store productivity to record levels. Development team continues to do a tremendous job delivering new restaurants, despite the many issues we’re facing, including construction labor shortages, permitting delays and raw material and equipment shortages. Although these issues have lengthened the timeline of our new restaurants, our pipeline continues to be strong and we expect to open between 235 and 250 new restaurants in 2022 with at least 80%, including a Chipotlane. Let me end by expressing my appreciation to our over 100,000 team members in our restaurants, in field leadership teams and in our restaurant support centers for their efforts to serve and delight our guests. I was thrilled to see our general managers and field leaders at our all-manager conference last month and personally thank them for their dedication and hard work over the past several years and share with them the opportunity that they all have as we grow from 3,000 restaurants to 7,000 restaurants in the years to come. With that, we’re happy to take your questions. Operator: Thank you. And the first question will be from Nicole Miller with Piper Sandler. Please go ahead. Nicole Miller: Good afternoon and thanks for the update. If I could just ask two quick ones, I guess, both really centered first on the top line. If the comp is set to improve through the quarter, is it basically saying you haven’t seen any pushback on price? And if I’m looking back in a year ago in 2Q, it looks like traffic comparisons ease as you exit the quarter? Is there anything else – is that what’s going on? And is there anything else we have to take into consideration in terms of a digital influence or a party size influence around mix shift? Jack Hartung: Yes. I mean, obviously what we’ve seen is very little resistance to the pricing so far. And in regard to kind of entrees per ticket as our in store business goes up, I think it was up like 30-some-odd percent this quarter and kind of digital is held as a percentage. You’ll see some shifting number of entrees per ticket just because the in-store occasion is more of an individual occasion than the digital occasion. Nicole Miller: All right. So that’s where you see a little give back in the mix shift, right, is around an individual order essentially versus a big party order? Jack Hartung: That’s right, Nicole. Because our transactions actually are up, even though we had pricing that was in that about 10% range. Our transactions are up 5%, but our check is down 6%. That’s partly because of group size, which is the shift from digital to in-store that Brian talked about. And then also with digital, you tend to have attachment rates that are a little bit higher with things like queso, avocados, extra meat. And then we’re also comparing against Cauliflower Rice from last year as well. So those are all the things that drove the checkdown. But underlying transactions are healthy. And the price increase is sticking just as expected. We don’t see any resistance. Nicole Miller: Okay. And so just a second and last question, I mean, that’s exactly what we’d be looking for any weakness you would observe in the consumer on price or other behavior. And it’s really just a reconciliation of the in-store. I could see one of the criticisms down the road, if the consumer does weaken or the macro, whichever way you want to take it, I’d be curious, if you’re underlying assumption with the development going to be a record setting year, you don’t have franchisees that slow you down. You don’t have landlords or lenders that slow you down. So if you feel the pressure on the consumer, will you slow that development purposefully to lower end of the range? Or will you just keep pushing through? Brian Niccol: No. I mean, our plan is to grow and we think the strategies that we have and the results that we’re getting give us a lot of confidence to stay the course on our growth plans. Jack Hartung: Yes. And Nicole, I would just add. I literally just had a conversation with Tabassum who heads up our Real Estate. We had a leadership meeting and she’s out in the field with her teams and we had that conversation saying, listen, there’s a lot of noise going out there. The market is under stress, interest rates are going up. But no matter what happens out there, we have a strong balance sheet. We know we have a strong economics and we’re in this for the long haul. So make sure your teams realize we’re not slowing down. If anything, if there’s opportunities because others do pull back, let’s take that as an opportunity to go faster, not slower. Nicole Miller: Thank you. Operator: Thank you. And the next question will come from David Tarantino with Baird. Please go ahead. David Tarantino: Hi. Good afternoon. Jack, I just want to come back to the Q2 guidance for my first part of my question. Could you just explain why the comp you expect to get better as the quarter goes on? Is it strictly related to comparisons or is it something else that you think... Jack Hartung: There’s a lot going on, David, comparisons a lot of it. Easter shifted, we see a nice seasonally shift right after Easter and we saw the nice shift this past week. Easter last year was in the first week, it was like the third or fourth. So it was two weeks later. So we definitely saw that step up, which gives us confidence that now we’re in kind of a normal post-Easter phase. In the last week or so since Easter is behind us, we are seeing that step up. We’re seeing the full flow through of the menu price increase and we take those sales trends and then project them through the rest of the quarter. It gives us confidence that we’re going to step up from the approximately 9% that we’ve seen so far month to date in April up to that 10% to 12% guidance ranges that we gave. David Tarantino: Got it. Okay. That’s helpful. And then I wanted to come back, Brian, to your comments about throughput. I guess, this is one of the first calls you’ve highlighted that as a big opportunity in a while. Could you maybe give us a framework for where you are on the metrics you’re tracking versus where you used to be? I guess, prior to the pandemic, I guess, to frame up how much opportunity there is to really drive better throughput and potentially better sales through that attribute. Brian Niccol: Yes. Sure. So if you kind of go back just to kind of set kind of like a range for you. In our best time period, we were kind of in the low 30’s per 15 minutes peak. And then I think you heard me talking about this before the pandemic, we were targeting to get back to the mid 20’s, high 20’s and we were making a lot of great progress where we were closing on the kind of mid 20’s. And now where we are is we’re closing back in to get back to those mid 20’s. So, still a lot of headroom for where we can grow from here. But the thing that’s been really nice is as we’ve gotten stability in the teams, the restaurants are staffed, we’re seeing performance in throughput and we’re also seeing great performance in our digital make line of being on time and accurate. So lots of opportunities on both of those, but to kind of give you the gauge we’re kind of in the mid 20’s on throughput and we’d like to get closer to 30% sooner rather than later. So lots of work to do, lots of opportunity though with it. David Tarantino: Great. Thank you. Operator: And the next question will come from Andrew Charles with Cowen. Please go ahead. Andrew Charles: Great. Thank you. Jack, if we look out past the commodity and labor inflation that’s weighing on the industry in 2022, you guys have previously talked about 27% plus margins when $3 million volumes are reached. Is this still realistic? Is this still a real realistic level that could be reached without having taken outsize level of pricing? Jack Hartung: Yes. Andrew, listen, we still can get to that level. I mean the question is, when and how bumpy is it going to be between here and there. I mean, this really has been the most difficult period I’ve ever seen in terms of commodity month to month, quarter to quarter. But we know that we told in our guidance, we share that we expect to get back to the mid 20% range. And based on that volume to go from the current volumes in the $2.7 million range up to $3 million most of the flow through, most of the GAAP from the mid 20’s to get up to 27% will happen from flow through. And I think there’s going to be other efficiencies that we can find along the way, again, in a normal operating environment. So I still think that 27% is in play at that kind of volume. Andrew Charles: Super that’s very helpful. And then Brian, I know we’re talking a lot on this call as dine in rebounds about priorities in place before the pandemic, where such as throughput. One question I have for you just on catering. Can we talk about the opportunity there and how Chipotle is positioned sees on that as gatherings are happening. I know May is obviously a high volume month for you guys for catering given Cinco de Mayo, given graduation parties. How is Chipotle set up to capitalize on this opportunity? Brian Niccol: Yes. Look, it’s a great question. And I think it’s a great opportunity for us. The good news is we’re already seeing catering interests come back. And you mentioned you kind of got kind of the key events for a group gatherings coming up with graduation season. And the team’s done a great job I think of making our digital process a much easier process for people to do the catering. And then, we’ve got a team focused on how we continue to drive those group occasions going forward. So we think there’s upside for sure in it. It’s nice to see the consumer coming back to the occasion and I think we’re well positioned to continue grow in that space. Andrew Charles: Very helpful. Thanks guys. Operator: And the next question will come from Jared Garber with Goldman Sachs. Please go ahead. Jared Garber: Hi. Thanks for taking the question. My question’s related to the labor line. Wanted to get an update on where you are, I guess at staffing levels. And maybe I don’t know if the best way to frame that is versus pre-COVID or maybe more appropriate is where those staffing levels are versus how you’re expecting them to run right now, given the level of volume in the business? And then a follow-up on that. We saw last week in one of your releases that turnover was high. I mean, I’m sure it was you as the entire industry. But just wondering if there’s any way to frame, maybe how much incremental labor costs flowed through the system last year and are still are flowing through the system, given some of the incremental training costs and maybe some lower productivity from new employees. Brian Niccol: Yes. So the first part of your question, I would say the good news is we’re in the call it 85%, 90% of restaurants being staffed at model, which is really tremendous. We’ll always want to strive for 100%, but being that 85%, 90% range is really something that would say is better than we were pre-pandemic just to kind of give you a gauge. Pre-pandemic, we’re probably more in the 80% range. Going forward, one of the things that we’re really happy to see actually is at the manager level and above we’re seeing more stability. So we’re seeing less turnover take place there. Usually, how that works then is that cascades into the crew. You are coming up on kind of a season where you’ve got some transition just with kids coming out of college and the end of the school year for people it’s just a shift in people’s working habits. So we do see some bumps in kind of turnover at that timeframe. But I really think we got a lot of strength in our management leadership and when you have strength in the management leadership that cascades into the crew. So we’re liking how we’re set up for kind of coming into the spring summer season. Jared Garber: Great. Thanks. And then Jack, I’m not sure if there’s anything on just thinking through labor productivity in the stores, as we think about the margins for the balance of the year and go forward. Brian Niccol: Yes. Jared, I would say we’re in a – like a – I’d say a normal operating environment meaning our turnover is normal at the crew level. It’s better than normal for the past few years at the manager level. So that means we always have hours built into our P&L for training. And that works as long as you have a few people a month that you’re bringing on in terms of new crew to train. Now during a time like last year at about this time when we were losing more people, our turnover was up and it was harder to rehire that would put a lot of stress on the system, put a lot of stress in terms of training, put a lot of stress in terms of overtime. So there are stresses not just from how the teams are forming the customer experience, but also the stress on the P&L. And I would say, we’re back to business as usual right now. So I think other than the inflation that we’ve already taken on the labor line, I think going forward in terms of the training, the turnover exclusions, knock on wood seem to be largely behind us with Omicron. It’s business as usual with our hiring training and leading our crew. Jared Garber: Very helpful. Thank you. Operator: Thank you. And our next question will come from John Glass with Morgan Stanley. Please go ahead. John Glass: Thanks very much. First just a follow-up. Where did wage inflation fall in the first quarter? Some of some of your competitors are starting to talk about some stabilization of wage growth. So it's not that it's getting better, but the rate of inflation is starting to go up. Are you experiencing that? Or is it still an inflationary, meaning accelerating quarter-over-quarter or month-over-month? Brian Niccol: No, it was normal, John. It was more in kind of that mid-single-digit kind of range. I mean, remember, we took that big step up, that 15% raise back in the second quarter. And so, it's been more in the normal range, but it's on top of the 15% we already took. John Glass: Thank you. And Brian, you mentioned automation and this Chippy robot or whatever it is that that makes chips. How big an opportunity do you see this? I understand these are longer-term bets. But is there – how big an automation opportunity is there within Chipotle? Is this something that could have a meaningful impact over time on store margins? Are there more tasks you're looking at to automate? Or is this sort of a one-off and kind of an interesting thing to test? Brian Niccol: No, look, I think there is a real opportunity frankly to make the restaurant be much more efficient. Obviously, Chippy is our first attempt. And we've worked with a lot of our employees to identify what are the tasks that they would love to see us bring automation to or AI, so that hopefully the role can become less complicated. And then I think there is just other places in the back of the restaurant where we have the ability to automate, whether it's on the digital make-line or other tasks. I think there is just tremendous opportunity for us to become even more efficient where it results in a better employee experience and also a better customer experience. And that's really the lens we're using on this. John Glass: And do you think that's years away or quarters away? And what's the time – as you look at where the technology is today? Or what's the time horizon which this starts to really materialize? Brian Niccol: Look, I think the technology is very close in. The ability then to scale it and get it installed. That's what we have to learn. And we're getting ready to put Chippy into a restaurant and then we've got a lot of other initiatives in works at our Cultivate Center. So the technology is actually close in. The prototypes are close in. It's then putting it through the stage gate process and really understanding people's ability to scale up and then actually install, assuming it performs the way we think it's going to perform. John Glass: Okay. Thank you. Operator: The next question is from David Palmer with Evercore ISI. Please go ahead. David Palmer: Thanks. A quick follow-up on the throughput opportunity you mentioned. Where do you often see the bottleneck if there is one or that maybe on the other side lead you to an initiative or an area of focus for you? Obviously, you're measuring people against this in terms of speed. But maybe there is a certain area in that, whether it's a kitchen or other. And I'm wondering also is your labor scheduling tool a part of this solution? Brian Niccol: Yes. So it's twofold. It is having better deployment, which, obviously, the labor scheduling tool will help us with that. It also better informs our forecasting as well versus moving from just looking back over the prior four weeks and trying to project up prior four weeks. It's now using real-time information to project what's going to happen in the coming week. So what we see is a better forecast, which results in a better schedule. And then what it also helps us do is deploy correctly. And the reason why the deployment is important is we need people to be in their positions, right. And the most – probably most pressing spot is that expedited role, which is really in between kind of the last phase of making your bowl of burrito and getting to cash. And if the team isn't deployed correctly, but sometimes that's the spot that doesn't get the right support. And as a result, it kind of slows the line down. But obviously, it all has to work in concert, right. You need to have people that have had a lot of reps. They need to be trained to be able to move people down the line and make the bowls and burritos correctly. But it's the combination of those two things, having people in the right positions and arguably one of the most important positions is that expediter position, the way you get there is to make sure you got a right forecast. David Palmer: And then I just – one about just insights. As we get into a little bit more of a mobile consumer environment and maybe people getting back to work, are there any sort of emerging realities that are surprising to you about perhaps your dinner staying were at higher levels, your lunch not coming back as quickly as you'd like, maybe competition taking share as they're reopening in certain trade areas, any insights there about the reopen. Brian Niccol: No. The biggest thing I would tell you is the more we see people have mobility, the more we see our lunch business come back. And the nice thing is we've seen these new occasions whether it's a dinner occasion or a group occasion remain pretty sticky in the business. So I think the thing that is playing out is what people that have had experience with us for new occasions love the culinary and they're using us for these other occasions. And our rewards program, I think, is doing a nice job of understanding those journeys and then building the right engagement going forward. So mobility is a key piece of the puzzle because you want people out and about and you want people go into their office or going to their activity. That's how you get that restaurant experience back. David Palmer: Thank you. Operator: The next question will be from Jon Tower from Citi. Please go ahead. Jon Tower: Awesome. Just quick in terms of a – well, bookkeeping and then a question. In terms of the delivery mix in the quarter, I was wondering if you could comment on where that settled. And then just thinking about the labor situation going back to that point, I know obviously, you guys have made quite a bit of investment in your employees over time and have given them a nice path to make a lot more money over time, assuming they earn it in the system. But I'm curious, when you think about the investments that you made, do you think that's enough to keep people engaged into the balance of this year and going forward? Or do you foresee perhaps even more labor investment necessary in the future outside of just normalized inflationary spend? Brian Niccol: Yes. Look, I think the one thing I want to emphasize on labor is what we've heard from people that are with our company. So they've been with us five, six, seven years, what they get excited about is all the growth because they can go from being an apprentice to a general manager to a field leader to a team director, regional vice president. And it's a reality because we're building 200, 300 restaurants a year. They know they have to be developing themselves and others, so that they can step into the next opportunity. That's where they get the greatest change in both, I would say, professional satisfaction as well as the wages that come with it. We do know we've got a very competitive starting wage, but what people get really excited about is where that starting wage can take them. And our company can take them really far and also really quick. So it's great that we have all the other benefits that I think separate us and continue to be consistent with our purpose of cultivating a better world. But when I've had the opportunity to get out in the field and talk to people, what they're really excited about is the fact that they're a part of a company that's committed to its purpose and committed to growth. And that growth is both for them as an individual as well as those that work around them. And that's what we're going to keep investing in. So we haven't seen a whole lot of pressure on the starting wage, where we are putting a lot of pressure is on making sure that we're developing our people, so they're ready for the growth. Jon Tower: Got it. And just delivery mix and then the second piece in terms of… Brian Niccol: Yes, sorry, delivery mix is like low 20s, 20%, 21%. Jon Tower: Okay. And in terms of thinking about. Sorry about that. Brian Niccol: No, no. Go ahead. Jon Tower: I was just going to ask about pricing expectations for the balance of 2022. Obviously, you just took a chunk recently. Curious if all else holds for the balance of the year based upon your expectations for wage rate inflation and obviously commodities appear to be all over the map. But at this moment, are you anticipating future pricing action in the balance of 2022? Brian Niccol: You know, gosh, I really hope we don't have to take more pricing, but I'm going to kind of give you the same answer I've been giving you for the last, call it, 12 months, which is, if it moves and we can't find efficiencies to offset it, the good news is we've got the pricing power to make a move. I really don't want to be ahead of it. So I think a great example is probably what you just saw over this last quarter. Look, inflation continued to move in a big way. We saw it wasn't going away, so we had to take the pricing action that we did. And hopefully, that won't continue to be the case. But if it has to be the case, we have, I think, the organization, the people and the pricing power to do it, but it really is the last thing I'd like to do. Jon Tower: Got it. Thanks for taking the questions. Operator: Thank you. And the next question will be from John Ivankoe with JP Morgan. Please go ahead. John Ivankoe: Hi, thank you. I wanted to revisit some of the numbers that were in the ESG report that you guys published because it did look like some of the general manager and field level turnover was actually up 2021 versus 2020. Was that something that just happened maybe in the middle of the year as part of kind of the great resignation we've seen a significant improvement in trends? I guess did that surprise you in any way? And I guess how has some of that normally maybe slightly more stable, your employee base changed as we've come into 2022? Brian Niccol: Yes, sure. So obviously, that's looking back at 2021. And yes, look, there were a lot of ups and downs with Omicron. There were a lot of ups and downs with wages. And obviously, that was a tough time to be running restaurants. There was a lot of situations where you were understaffed. And then it was very hard to get people to sign up to work. And the good news is we've made tremendous progress. Obviously, we've increased our starting wage. I think we've done a much better job of explaining the growth path at our company. And then illustrating that growth path by having 90% of our promotions come from internal promotion – internal employees. So that's why when you fast forward to 2022, we're in just such a better place with stability, definitely at the manager level. And then I think that will follow into the crew. So what the challenges were in 2022. I think we get them. And we're leaning into our purpose values and growth platforms to keep people excited about being at Chipotle. John Ivankoe: And hopefully, this is an appropriate follow-up. But obviously, in the last six months or so, labor units have really become a very topical subject for companies that didn't quite frankly, even mention them for years of discussion of covering some of these means, both in the retail and the restaurant side. It's obviously great that you guys recently had in all manager conference that was just in March. I guess what can you do? I guess you'd kind of always stay in front of that issue and maybe de-risk that from a Chipotle perspective? Again, hopefully, that's a perfect question to ask in a public call. Brian Niccol: Yes. Look, I mean, what we're committed to is developing our people and growing people that want to be at Chipotle. And the best thing we can do is make sure that they're trained, so that they're successful in their job, and then that we give them a culture and a leader that develops them so they realize they have the growth opportunities at Chipotle. And that's why – look I can't remember who asked the question, but it's kind of – hopefully, you're not surprised by my answer when you asked like, well, what's next after Chippy. Well, the answer is we talk to our employees to find out what would be the tasks that would make sense for us to automate in the restaurant to make the employee experience better because we know if the employee experience improves, we'll have better retention and also we'll have better execution than for our customers. And so we really spend a lot of time communicating and taking action on how we can improve the employee experience. And then we spend the time developing our people. And you mentioned, we just had this all manager conference, right. I mean, it was electric man. It was so great to have all our leaders in one place understanding the future of Chipotle and how they play such a critical role. And we had the opportunity to have everybody in the room stand up that's been promoted over the last four years and you know what, almost every person in the room was standing up. I don't think there are many places where that happens, so we have to continue to stay committed to our purpose, our culture and the development of our people. So that when you end up at all manager conferences, and you got just about everybody in the room standing up because they've been promoted or they've developed others that have gotten promoted so that's what we're focused on. That's our proposition. That's who we are. If you want to be a part of that we're going to be building lots of restaurants that present an opportunity for you to be a part of it. John Ivankoe: That's great. Thank you. Operator: The next question is from Dennis Geiger with UBS. Please go ahead. Dennis Geiger: Great. Thank you. Jack, I wanted to ask another one on margins and thinking about cost pressures over the balance of the year. Great insights on the 2Q and kind of getting back to that mid-20s level already and recognizing there's a lot of moving pieces through the year, but is there any additional color that you could share even at a high level in thinking about back half restaurant margins with respect to food inflation? I guess particularly in light of how Brian, just spoke to pricing philosophy, if there's anything you can add at a high level there? Jack Hartung: Yes. We – again, we just had at our leadership meeting, of my group, we talked to Carlos, our Head of Supply Chain and there's nothing we can see on the horizon that says, things are going to retreat, that things are going to go down, but things have at least for the time being stabilized. So that's what right now we can hope for as a stable environment, we do expect there's going to be an inflection point at some point. The pressures of getting some of our like packaging, for example, in from overseas, the pressure that some of the suppliers are having, whether it's from a labor standpoint or just from a cost standpoint for their input costs, what we can hope for is that, that they don't step up from here. They stabilize. And at some point they just kind of normalize in the future, but right now, if I was going to build a model, I would not build in a reduction in food cost for the fourth quarter, it looks like it's more going to be something in 2023 before we see that. Dennis Geiger: Great. Thank you. And then just one quick one, apologies if I missed it, but could you guys speak to kind of the percent of the dine-in sales or traffic that have recovered at this point, I don’t know if you can touch on kind of that overlap with digital, that digital dine-in customer. And then related to that, just how exciting the further dine-in recovery can be here as it relates to how low that that overlap is, if there's any commentary there. Thank you. Jack Hartung: Yes, look, I think one of the things we mentioned was our in-restaurant sales increased by 33%, while digital remained roughly 40% of our business, right. And one thing that I mentioned earlier in the call is as we continue to see people increase their mobility, I think we will continue to see gains in the in-restaurant experience. And I don't see these digital occasions just disappearing. I think they're going to continue to play their role and we're working hard on keeping digital to be frictionless and just completely intuitive. And then at the same token, we're working hard on having great throughput with great culinary and the good news is there's a lot of room to grow in both of these things. That's why we're optimistic, we'll get to 3 million AUVs. And while we do that, we're going to build a lot of restaurants. So I think we're in a really good spot. And obviously I'm excited for, hopefully COVID staying behind us and inflation stabilizing, and hopefully in 2023 maybe you can see some improvement on that front. But regardless, I think we've demonstrated we've got a business, a brand and an organization that can handle it all. Dennis Geiger: Great. Thank you very much. Operator: The next question is from Lauren Silberman from Credit Suisse. Please go ahead. Lauren Silberman: Thank you for the question. Jack, I think you had mentioned new store productivity at record levels. Can you just provide an update on where new unit productivity and cash on cash returns are running today? Jack Hartung: Yes. The productivity's been in that kind of mid-80s to high 80s, depending on the quarter, it may have touched like 90% from time to time. And what I mean by that is that's the percentage of mature restaurants of our comp restaurant when we deliver those kind of openings, sales, when most of them are Chipotlane, which is more efficient than a non-Chipotlane. Our cash-on-cash returns are in the 40%, 45% range out of the box. When you put a couple years of comp on that, as they basically close the gap and get very close to our average volumes, our comp restaurants, we're talking about returns in the 60%, 65% returns within just a few years. Lauren Silberman: Great. Thank you for that. And just on menu innovation, can you talk about how you are thinking about menu innovation for the rest of this 2022 and specifically just how you're thinking about opportunities for innovation around proteins versus other parts of the menu? Jack Hartung: Sure. I think we've kind of established a pretty good cadence here where we do, call it two to three menu initiatives a year. And we have a few protein initiatives in place that, I'm sure you'll see in test. And then we're continuing to work hard on trying to figure out a dissert proposition or another call it add-on item, right. So to compliment how we have guac on, 50% of our transactions, I think queso on like, what is it, 20 some odd percent something of our transaction. So it's like if we could find another add-on like that, whether it comes as a dessert or in that space, like a queso guac, you'll see us continue innovating in those areas. But we think we've got a lot of room to still I think excite and engage customers with the chicken steak plant-based solutions and at the same time look at these other add-on opportunities. Lauren Silberman: Great. Thank you guys. Jack Hartung: Sure. Operator: The next question is from Brian Vaccaro from Raymond James. Please go ahead. Brian Vaccaro: Thanks and good afternoon. Question was on the commodity inflation backdrop and sorry if I missed it, but Jack, what was inflation on the basket in the first quarter? Jack Hartung: Yes, it was in that like 12% to 13% range. Again it's the highest inflation I've ever seen. Brian Vaccaro: Yes, I guess… Jack Hartung: Hopefully we've seen the last of it. Like I said, in a few comments ago, things have stabilized for now. If you get one month in a row, that's stabilized, that's a start, but let's see what happens the next two or three months to see if we see stable costs. Brian Vaccaro: Right. And if you did see that stabilization sort of hold, would you start to see that year-on-year inflation moderate into Q4 or at this point, are you just thinking, we'll be in the low teens for now, until that dynamic changes? Jack Hartung: Yes. I mean, listen, as you go throughout the year, if it stabilized completely that 13 is going to tick down as we compare to some of the inflation we saw last year, but most of that 13 is going to be with us for the rest of the year. I think importantly is the food cost that we talked about being in kind of that 31% range if commodity costs stay stable, we should stay in that range for the rest of the year. And we know that our margin, we have our full margin potential ahead of us, if we keep our food costs in that like 31% range. So knock on wood that things stabilize to make pricing increases we've taken so far will give us that margin potential that we know is possible. Brian Vaccaro: All right, great. That's helpful. And then on the comps, could you just level set, if you don't take additional pricing, where would effective pricing be over the next couple quarters? And then on mix specifically, does that start to normalize now on a year-over-year basis? I know we're kind of, there's been some funky comparisons on the mix front, the last four quarters now it seems, does that sort of flatten out next several quarters? Jack Hartung: Yes. Well, on menu prices, they'll step up a bit in the second quarter. So we'll move from like call it a 10, 10.5 to like call it a 12.5, something like that. Then it steps down to a little under 10, then it'll step down in the fourth quarter to like in an 8.5. Mix, it just depends on the mobility that we talked about before, mix for the foreseeable future is going to be at this lower check size, because we're comparing to – last year where most of the year, a good part of the year still had very heavy digital. I mean, we did start stepping down near the end of the year. So I think you're still going to see like year-over-year, the group size is going to be lower. There's going to be relatively, in terms of a percentage growth, like we saw 33% growth in in-restaurant versus digital. I think you'll see some numbers like that. So I still think you're going to see some distortion where the group size is getting smaller and you're going to see transactions grow while the average check, excluding menu price increase is going to decline a bit, but we'll keep you guys updated each quarter on what those components are. Brian Vaccaro: All right. That's very helpful. Thank you. I'll pass it along. Jack Hartung: Operator, is there one more question? Hello? Jack Hartung: Well, I don't know if we're having technical trouble. We can't hear the operator or anyone else. We're about at the end of the time. So Brian, I don't know if you want to make a closing comment. Brian Niccol: Yes, sure. So I'll just close this real quick. Thanks for taking the time. Thanks for the questions, obviously very proud of our results in the quarter. Very proud of the work that's been done today. I think the one thing that's worth reminding people, there's a few things that haven't changed, right. We have a great brand, we've got a great culture. We've got a unique purpose around cultivating a better world. And we've got tremendous growth in front of us both within the existing restaurant, between the combination of our in-restaurant opportunity and our digital business, as well as adding additional restaurants across the country. And one thing that I'm confident about is our culture. Our people will capture the upside for this business and continue to drive growth going forward. So thank you for taking the time. And I look forward to talking to you next quarter. Take care.
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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.