Chipotle Mexican Grill, Inc. (CMG) on Q3 2021 Results - Earnings Call Transcript

Operator: Good day and welcome to the Chipotle Mexican Grill Third Quarter 2021 Results Conference Call. All participants will be in a listen-only mode. Please note this event is being recorded. I would now like to turn the conference over to Ashish Kohli, Head of Investor Relations. Please go ahead. Ashish Kohli: Hello, everyone, and welcome to our Third Quarter Fiscal 2021 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 in our Form 10-Q for a discussion of risks that may cause our actual results to vary from these forward-looking statements. Our discussions today will include non-GAAP financial measures, 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'd like to turn the call over to Brian. Brian Niccol: Thanks, Ashish. And good afternoon, everyone. Chipotle’s third quarter results highlight strong momentum in our business fueled by a multi-pronged growth strategy and a passionate team that's delighted to see more guests coming back into our restaurants. We continue to retain about 80% of digital sales, but have now recovered nearly 80% of in-restaurant sales. While COVID impacts will likely persist for a few more quarters, we are hopeful that the worst is behind us and society can shortly return to a more normal environment. Personally, I'm thrilled to welcome our restaurant support center leaders back to the office beginning in November, which will allow us to optimize creativity, camaraderie, and effectiveness. Key elements that helped make Chipotle a unique and powerful brand. For the quarter, we reported record quarterly sales of $2 billion representing 21.9% year-over-year growth, which was fueled by 15.1% increase in comparable restaurant sales. Restaurant level margin of 23.5% was 400 basis points higher than the 19.5% we reported last year. Earnings per share adjusted for unusual items of $7.02, representing an increase of 86.7% year-over-year. Digital sales growth of 8.6% year-over-year, representing 42.8% of sales. And we opened 41 new restaurants including 36 with a Chipotle. And I'm pleased to report that Q4 is off to a great start. These results highlight that our key strategies continue to resonate with guests and allow us to win today while we create the future. While we regularly get asked what's next, I believe our current growth drivers have plenty of runways and will be critical to us reaching our longer-term goal of 6,000 restaurants in North America with AUVs above $3,000,000 and improving returns on invested capital. To remind everyone, we're focusing on five key areas. Number 1, opening and running successful restaurants with a strong culture that provides great food with integrity while delivering exceptional in-restaurant and digital experiences. Number 2, utilizing a disciplined approach to creativity and innovation. Number 3, leveraging digital capabilities to drive productivity and expand access, convenience, and engagement. Number 4, engaging with customers through our loyalty program to drive transactions and frequency. And last but certainly not least, number 5, making the brand visible, relevant, and loved. Let me now provide a brief update on each of these, starting with operations. Well-trained and supported employees consistently preparing delicious food and delivering excellent guest experiences are at the heart of our success. We're fortunate to have amazing employees at our restaurants who have stayed focused on safety, reliability, and excellent culinary despite the dynamic and challenging environment. I've said it before and I'll say it again. Our people are our greatest asset and I can't thank them enough for all their efforts. We are extremely proud of Chipotle's 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, which is more important than ever given the challenging labor environment we're all experiencing today. Over the past 18 months, we've made operational adjustments to adapt to our constantly changing environment in support of our in restaurant business, as well as our record-breaking digital business. As a result, we've had to allocate labor as needed among the different roles, including the DML and the front line, depending on available staff to accommodate the needs of our customers and our restaurant teams. This flexibility has allowed us to keep our frontline open given our ability to divert orders on the digital lines as needed to overcome periodic staffing challenges. This is part of the normal business balancing that occurs at the discretion of on-site managers and has not had a material impact on our business in the past. This was true pre -pandemic and is more relevant now as dining room volumes recover. The good news is that I believe we're finally getting back to pre -pandemic operations and I couldn't be more excited. We're fortunate to have a dedicated digital make-line and a dedicated dining room serving line. Our frontline represented nearly 60% of our business or $1.1 billion of sales for the quarter. It is big and it is growing. We are committed to ensuring guests on the frontline get the customized meal they want made with real ingredients, excellent culinary, and faster than anywhere else. We still have some work to do, but our goal is to provide exceptional throughput as speed of service is a foundational element of convenience that our guests truly value. Therefore, 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. While taking good care of guests is always a top priority, utilizing our stage-gate process to continue innovating is critical to our growth. The great news is that Chipotle is delicious food that you feel good about eating, which creates an emotional connection with our customers and they love to see ongoing innovation from us. As a result, we introduced new menu items on a regular cadence as it helps bring in additional customers, drive frequency with existing users, and gives us an opportunity to create buzz around the brand. Recently, we launched smoked brisket for a limited time across all our U.S. and Canadian restaurants. Our culinary team spent the last 2 years developing the perfect smoked brisket recipe that is unique to our brand and pairs flawlessly with our fresh, real ingredients. This is our third new menu item this year, following on the success of our cilantro lime cauliflower rice and handcrafted quesadilla. Early customer feedback on this entree, which is expected to last through November, has been very positive and we're delighted to see an increase in both check size and transactions. Quesadillas, which we launched as a permanent digital exclusive offering in March, continues to perform well and is also helping attract new customers to Chipotle. By the way, if you haven't had a chance to try the brisket quesadilla, you really are missing out. And we're far from being done. Plant-based Chorizo is currently being tested in a couple of markets. And our talented culinary team is in the early stages of developing other exciting menu items. All that being said, our stage gate process is not limited to new menu innovations. We use it for many parts of the business, including development. As you know, we validated new restaurant expansion in Canada earlier this year. Impressive unit economics with AUVs and margins equal to or above those in the U.S. led us to accelerate development in this market. We've opened one new restaurant in Canada year-to-date and have several more planned before year-end, including our first-ever Chipotlane that's scheduled to open next week. Similarly, we are now in the early stages of using this process to learn, iterate, and eventually validate expansion in Western Europe. COVID slowed our ability to execute several critical initiatives. However, with restrictions easing, we're making nice progress and have implemented some of our digital assets as well as begun to test alternative formats and exploring new trade areas. The recent openings have exceeded expectations. So while we continue to view international expansion as a medium to longer-term opportunity, I remain quite optimistic about its future contribution to the Chipotle story. A more near-term pillar of growth has been our ongoing digital transformation, which is helping Chipotle become a real food focused digital lifestyle brand. During the third quarter, digital sales grew nearly 9% year-over-year to $840 million and represented 43% of sales. We're not surprised to see the mix moderate as the world continues to reopen. However, we're pleased to see our digital sales dollars continued to grow despite lapping tough comparisons. In fact, our year-to-date digital sales of nearly $2.7 billion or just slightly below the $2.8 billion we achieved during all of last year. Digital is proving to be sticky as it's a frictionless and convenient experience that has been aided by continuous technology investments to improve operational execution, innovation, and the customer value proposition. As a result of the pandemic, many new consumers were introduced to Chipotle via digital channels, and are now using us for alternative occasions. The thing I love about having two separate businesses is that they serve different needs that will likely prove to be incremental and complementary over the long run. This is reinforced by the fact that different guests are accessing Chipotle through different channels. Currently about 65% of our guests use in-restaurant as their main excess point. Nearly 20% use digital as their primary channel, and the remaining 15 to 20% use both channels. We're encouraged by this dynamic as it gives us several future opportunities, including the ability to convert more of our in-restaurant guests into higher-frequency digital users. Not only are we pleased with the level of digital sales and overall mix, but we're also delighted to see that our highest margin transaction, digital pickup orders, is gaining traction. This channel represented slightly more than half of digital sales in Q3. As always, we're not being complacent and continue to look for ways to enhance convenience and access through alternate restaurant formats, digital-only menu offerings, and leveraging our large and growing loyalty program. Speaking of the loyalty program, we're excited to have more than 24.5 million members, many of whom are new to the brand. This gives us a large captive audience to engage with and distribute content that promotes our values, as well as motivates our super fans. We continue to leverage our CRM sophistication by focusing a lot more on personalization and using predictive modeling to trigger journeys primarily for new and lapsed customers. These personalized messages are more brand-related as opposed to offers or discounts, which is allowing us to optimize program foundation and economics. All these efforts, along with the use of enhanced analytics are allowing us to consistently attract more visits from loyalty members than non-members. No doubt the loyalty program has moved from a crawl to the walk stage and we still have a lot of room to grow. Offering new ways to engage with Chipotle is essential to the ongoing evolution of our digital business. Our first enhancement was rewards exchange, which provides greater customization and flexibility to redeem rewards and allows guests to earn rewards faster. More recently, we announced extras and exclusive feature that gamifies Chipotle rewards with personalized challenges to earn the extra points and/or collect achievement badges in order to drive engagement. As the program grows, so does our ability to provide sophisticated and relevant communications to our guests, which will ultimately deepen the relationship between members and the brand. We are pleased with our progress to-date, but believe with ongoing investments in further leveraging of data driven insights, we can get even better. Amplifying all the growth initiatives I've mentioned thus far are the collective efforts of the marketing team, which are designed to make Chipotle more visible, more relevant, and more loved. We believe that real food has the power to change the world and using custom creative across a wide variety of media channels that allow us to drive culture, drive difference, and ultimately drive a purchase. For example, we use numerous campaigns to stay relevant via important sporting events such as the basketball championships, where we had a million dollars’ worth of free burritos and our TV advertising. We also utilize social media, including our website to authentically highlight real food for real athletes during the broadcast from Tokyo. And of course, to celebrate the launch of smoked brisket, we offered an exclusive peek to our loyalty members prior to a full launch, supported by a media plan across online, video, digital, and social media platforms, as well as traditional TV spots. All of these helped attract new guests into the Chipotle family, as well as increase frequency of existing users. We're fortunate to have an innovative marketing team that wants to be a leader, not a follower. And our marketing organization is built on a culture of accountability that encourages new ideas, is committed to experimentation, and is ruthless on measuring returns, and isn't afraid to pivot to different opportunities if they don't perform to our high standards. Every day this team is focused on driving sales today, while enhancing our brand for tomorrow. Chipotle is committed to fostering a culture that value and champions our diversity, while leveraging the individual talents of all team members to grow our business, elevate our brand, and cultivate a better world. Our team has proven their ability to be resilient and successfully execute against macro-complexities. Again, a huge thank you to our nearly 95,000 employees for all their efforts. As a result, I believe we are better positioned to drive sustainable, long-term growth than we were before the pandemic, which makes me even more excited about what we can accomplish in the years ahead. With that, here's Jack to walk you through the financials. Jack Hartung: Thanks, Brian. And good afternoon, everyone. We're pleased to report solid third quarter results with sales growing 21.9% year-over-year to $2 billion as comp sales grew 15.1%. Restaurant level margin of 23.5% expanded 400 basis points over last year. And earnings per share adjusted for unusual items were $7.02, representing 86.7% year-over-year growth. The third quarter had a GAAP tax benefit that I will discuss shortly, which is partially offset by expenses related to a previously disclosed modification to our 2018 performance shares and transformation expenses, which netted to positively impact our earnings per share by $0.16, leaving the GAAP EPS of $7.18. As we look ahead to Q4, there remains uncertainty on several fronts, including COVID -related impacts, as well as inflationary and staffing pressures. But given our strong underlying business momentum, we expect our comp to be in the low to mid double-digits, which is encouraging considering there will be about 200 basis points less in pricing contribution during Q4 versus Q3 as we class some of our delivery menu price increases. And our brisket LTO will be for a partial quarter as compared to the full quarter of carnitas out of last year. Let me now go through the P&L line items, beginning with cost of sales. Our supply chain team has done an outstanding job navigating the numerous industry-wide disruptions, which led to food cost being 30.3% in Q3, a decrease of 200 basis points from last year. This was due primarily to leverage from menu price increases, which were partially offset by higher costs associated with beef and freight that unfortunately are continuing to worsen. Hard to predict how much of these headwinds will ultimately be temporary versus permanent, but they're likely to persist for the foreseeable future. In addition, Q4 will also include the higher-cost brisket LTO, which collectively will result in our food cost being in the low 31% range for the quarter. Labor costs for the third quarter were 25.8%, an increase of about 40 basis points from last year. This increase was driven by our strategy to increase average nationwide wages to $15 per hour, which is partially offset by menu price increases, sales leverage, and a one-time employee retention credit. Given ongoing elevated wage inflation and greater new unit openings, we expect labor costs to be in the mid 26% range in Q4. Other operating costs for the quarter were 15.1%, a decrease of a 170 basis points from last year due primarily to price and sales leverage. Marketing promo costs for the quarter were 2.4%, about 20 basis points lower than we spent last year. While Q3 tends to be a seasonally lower advertising quarter, the timing of some initiatives also shifted into Q4 this year. As a result, we anticipate marketing expense to be around 4% in Q4 to support smoked brisket and for the latest brand messaging under our Behind the Foil campaign. For the full-year 2021, marketing spend is expected to remain right about 3% of sales. Overall, other operating costs are expected to be in the mid-60% range for the fourth quarter. Looking at overall restaurant margins, we expect Q4 to be in the 20% to 21% range. Our Q4 underlying margin would be around 22% when you normalize marketing spend and remove the temporary headwind from the brisket LTO. And the remaining cost pressure will continue to evaluate and take appropriate actions on menu prices to upset any lasting impacts. Our value proposition remains strong, which we believe gives us a lot of pricing power. Despite these challenges, we remain confident in our ability to drive restaurant level margins higher as our average unit volumes increase. for the quarter was a $146 million on a GAAP basis for a $137 million on a non-GAAP basis, including $7.6 million for the previously mentioned modification for 2018 performance shares and $1.6 million related to transformation and other expenses. G&A also includes about a $100 million in underlying G&A, about $28 million related non-cash stock compensation, about $8.5 million related to higher performance-based bonus accruals and payroll taxes and equity vesting and stock option exercises, and roughly $600,000 related to our upcoming All Manager Conference. Looking to Q4, we expect our underlying G&A to be right around $101 million as we continue to make investments primarily in tech to support ongoing growth. We anticipate stock comp will likely be around $27 million in Q4, although this amount could move up or down based on our actual performance. We also expect to recognize around $5.5 million related to performance-based bonus expense and employer taxes associated with shares invest during the quarter, as well as about $1.5 million related to our All Manager Conference. Our effective tax rate for Q3 was 14.7% on a GAAP basis, and 19.7% on a non-GAAP basis. Both rate benefited from our option exercises and share vesting at elevated stock prices. In addition, our GAAP tax rate included a return to provision benefit for additional NOL generated on our 2020 federal income tax return, and carry back to prior years. For Q4, we continue to estimate our underlying effective tax rate to be in the 25% to 27% range, though it may vary based on discrete items. Our balance sheet remains healthy as we ended Q3 with $1.2 billion in cash, restricted cash and investments, with no debt along with $500 million untapped revolver. During the quarter we repurchased $99 million of our stock at average price of $1,813 and we expect to continue using excess free cash flow to opportunistically repurchase our stock. However, opening more Chipotle s continues to be the best return we can generate. During Q3, despite a few delays in opening timeline, we opened 41 new restaurants with 36 of these including a Chipotlane. While we're experiencing construction inflationary pressures, subcontractor, labor shortages, critical equipment shortages, and landlord delivery delays, our development team is doing an excellent job opening these new restaurants. In fact, we currently have more than a 110 restaurants under construction. And while timing is somewhat unpredictable, this gives us confidence in ending the year at or slightly above the 200 new restaurants with now more than 75%, including the Chipotlane versus our prior expectation of 70%. Also, the team has done a nice job building a robust new unit pipeline, which we believe will allow us to accelerate openings in 2022. But because of the challenges I just mentioned and how they could impact the timeline, we'll provide 2022 opening guidance during our Q4 call. As of September 30th, we had a total of 284 Chipotlane, including 12 conversions and 8 relocations. They continue to enhance access and convenience for our guests while demonstrating stellar performance. And while it's early days, Chipotlane conversions and relocations are yielding encouraging results. We'll leverage our stage-gate process to learn and refine our strategic approach to accelerating our Chipotlane portfolio. I'd like to close today by thanking all of our Chipotle team members for the exceptional results we're reporting today, as well as their hard work and dedication in helping to sustain our long-term powerful economic model. Maintaining a 40% pass-through on incremental sales as we expand AUVs will lead to higher margin and improving cash-on-cash restaurant returns. You can see why we remain optimistic about our future. With that, we're happy to take your questions. Operator: Thank you. We will now begin the question-and-answer session. At this time, we will pause momentarily to assemble our roster. And the first question will come from Andrew Charles with Cowen. Please go ahead. Andrew Charles: Great. Thanks and, Brian, just to vouch, that brisket quesadilla sure is killer. Jack, you noted the 4Q food and labor challenges. If we think ahead, I think the more important question is that, what is the business capable of achieving at $3 million sales volumes in terms of restaurant margins? Is 27%, 28%, is that still the right level or do you think the industry may for pressures in to some degree the freight challenge that you mentioned, does that make that margin level more aspirational? Thanks. Jack Hartung: Hey, Andrew. Listen, thanks for the question. And no, we still believe that that kind of margin range at 3 million is still very much in play. Listen, it's very much of a labor challenge right now. There's food inflation as we talked about. We don't know how much of this is temporary or transitional versus permanent, but what we do know is we've got what we believe is great value. Our customers continue to appreciate Chipotle. They love the convenience. They loved the value. And so we believe we've got pricing power really better than almost anybody if not everybody in the industry. So we'll be very patient. We're not going to cover inflation that hits in one quarter or another immediately, but we will carefully consider the fourth quarter, what action we will take. You know that it is about this time a year that we do consider what pricing we will take. But we'll be patient and watch and see what happens with inflation, how much stays permanent. But we've got pricing power to ensure those margins are in exactly the range you just talked about, Andrew. Andrew Charles: Got it. And just my other question still on brisket, is the issue of the fact that it's ending a little bit earlier in November versus what you saw side of last year. Is that just due to supply that just ran out or was that the case all along that November is probably targeted end date? Brian Niccol: We're probably a little bit shorter than we originally planned, but that's just a direct result of the great response from the consumer and the great execution of our operators. We got a great product, people have loved it, and it's driven both incremental transactions and check for us so we're really happy with and I'm guessing we'll probably do brisket again at some point in future. Andrew Charles: We're looking forward to that. Thanks, Brian. Brian Niccol: Yeah. Operator: And the next question will come from Sharon Zackfia with William Blair. Please go ahead. Sharon Zackfia: Good afternoon. I guess my question, kind of building on brisket; I know you had indicated, Jack that the cost could be up some sequentially. Can you kind of break that out into brisket versus just underlying inflation? And then I'm curious with brisket. I think it's the highest priced protein you've ever had. I mean, what does that taught you about where you can go on the menu? Jack Hartung: Yeah, Sharon, brisket, it's about at 50 basis point impact. And inflation is probably another about a 100 basis point impact and you've got pushes and pulls beyond that so. Brian Niccol: And then, just to your question about the pricing it just demonstrates the value proposition and the pricing power that we have in our business that I think Jack alluded to earlier. So we're really happy with the value proposition and the strength of our business. In the event we feel like we need to pull that pricing lever, we have the ability to do it. Operator: Thank you. And the next question will come from David Tarantino with Baird. Please, go ahead. David Tarantino: Hi. Good afternoon. A couple of questions. One, I wanted to clarify your fourth-quarter comps guidance. So I guess if I look at the 2-year comps performance you delivered in the third quarter and what you're projecting to the fourth quarter, it does imply a fairly meaningful step-down in that metric. And, Jack, I was just wondering if that's the right way to measure the business or I guess, I know there's differences in comparisons if you look further back, but I guess how are you viewing the 2-year comp metric as a guide post for your business? Jack Hartung: Yeah, David, I think you have to go back further because if you think about it, it was back 2 years ago, so it'd be if you look at a 3-year look now. When we first launched carne asada that was a huge hit. And then we relaunched carne asada and it jumped over the original carne asada result. And now we have brisket that's kind of one on top of both of those years. And so I think a 2-year doesn't take into account the strength and the strong comp we had in the fourth quarter back in 2019. To go back to 2019, the fourth-quarter comp was by far are IR comps. So I think the 2-year doesn't quite look at the whole package. When we look at the underlying trends with the exception, David, of the pricing that rolls off at about 200 basis points related to delivery that we took last year, we think the trends are holding up nicely. David Tarantino: Great. Thank you for that. And then, Brian, I wanted to ask about Europe. Your commentary there sounded fairly optimistic. So you mentioned that you're seeing better-than-expected performance from some of the recent openings, and I'm just wondering if you could elaborate on what changed for the recent openings and what exactly are you testing in the stage gate process. And how long will it be before you make a judgment on whether you have the model right for accelerated expansion? Brian Niccol: Yes. So I would say that the kind of the biggest difference is the first time we opened our restaurants with our digital mainlines as part of the opening and also having the access point of delivery as well. So -- and then we experimented with how big really the seats are. So all the restaurants have a nice dining room but some of the dining rooms are more like the size of our restaurants in New York City versus the size of the dining room you might find in a traditional suburban outlet. And the good news is we're seeing great results in both executions. And it's great to see the power of our digital business with the great customized in restaurant experience that you get. So I would tell you that's been the biggest shift. And then, we've also gone back and put into digital assets and all of our existing restaurants. And we're starting to see that take hold as well. So it's very early. A lot of these restaurants just opened in the last month or weeks, and we're really happy with the way that it started. Hopefully, we can continue to get earnings in an environment over the UK and then, ultimately, France, where COVID is not putting restrictions on the business. So I think you're right in interpreting we're really excited about the results we've seen, but its early days, and we want to make sure it performs ongoing, not just at the opening. David Tarantino: Great. Thank you very much. Operator: And the next question is from Jeffrey Bernstein, from Barclays. Please go ahead. Jeffrey Bernstein: Great. Thank you very much. Two questions as well. Just -- the first one in terms of specific cost outlook, who got lots of attention on the commodity and labor front. Jack, I'm just wondering, maybe you can share what it was maybe in the third quarter in terms of inflation. And more importantly, as you look out, whether it's the fourth quarter or any kind of directional thoughts, I know you mentioned what's transitory, what's permanent, but just your thoughts in terms of what it might be like as we look out into 2022. And then I had one follow-up. Jack Hartung: Jeff, I would say, I mean, we're dealing with the same inflationary environment that all restaurants and really all businesses are dealing with nowadays. Some of it comes from labor and I'm not talking about labor on our P&L now, I'm talking about our supplier labor. Everyone's dealing with the same kind of challenge. Some of it is raw material shortages as well. And so it's very hard to predict. I would say the inflation in the quarter was not that bad. It was mid-single-digit type inflation, but you see the same kind of list that we have seen that there are forecast for some material, not necessarily what we're buying, that are into the double-digit -- sometimes well into the double-digits. Now, we're not really seeing that. I mean, we're seeing isolated spikes, but most of our ingredients are okay. They're all pressured to the upside. And what we want to do is really take a look, be patient, and see how much of this is really because of things like shipping, like things that come in from outside this country. The freight is extra astronomically high. And the ability to get the supply we need a very, very challenging. So we want to see how that normalizes. There's material shortages, not just with our food and paper, but also with our openings as well. Some of that is going to normalize as well. So there's a lot for us to learn. Definitely there's upward pressure. And the thing that I would just tell you is we feel very comfortable that any inflation that is affecting our margins today, we have the ability to offset it. It's just a matter of let's be patient, let's wait and see what holds and what is transitory and we'll make the right moves at the right time but we'll be patient about it. Jeffrey Bernstein: Understood. And then the follow-up was right on that topic. In terms of menu pricing and the thought process in determining the right level, just wondering whether your goal would be to fully protect the margin, obviously removing the transitory. But if you felt like they were more permanent pressures, is the goal to fully protect the margin or do you think about more of the long-term traffic trends and maybe don't necessarily take the full pricing that you could otherwise potentially do. I'm just wondering, what's that thought process like? Maybe you've learned something with delivery; I know you took a very large increase there, wondering whether you're seeing the desired results of consumers shifting to more the Chipotle site or any learning’s from that that you could apply to broader pricing decisions? Thanks. Jack Hartung: Yeah. Jeff, it's a great question. And I would say that our ultimate goal, so this would be over the long term, maybe the medium-term is to fully protect our margins. We have great value. When you look at our pricing versus other restaurant companies for the quality of the food, the quantity of the food, and the quality and convenience of the experience, we offer great value. So we believe we have room to fully protect the margin, but we're not going to do it quarter-by-quarter. So we're not going to worry about pressure out a particular quarter on the margins. We're going to watch it for a few quarters and see what happens. But ultimately, our expectation, I think it gets back to the first question about when we get to $3 million volumes, do we expect the margin to be that same kind of 27%, 28%? We absolutely do. Brian Niccol: The only thing I would add to that is along those lines, the good news for us is we still have tremendous growth. We still have a lot of work that I think can always be ongoing to drive more efficiency and cost out of the business. And then on top of that, we got this great value proposition that allows us to take advantage of pricing once we understand the combination of growth, cost efficiencies, and then our value proposition. So that's why you're hearing Jack say he's very confident in our ability to, at the end of the day, capture the full margin and earnings possibility out of our business as we grow beyond $3 million averaging of volumes. Jeffrey Bernstein: But that 17% increase it took on delivery that you mentioned last quarter. I mean, I'm assuming something of that magnitude is having an impact in terms of shifting consumer preference or not necessarily? Jack Hartung: Well, first of all, I would just clarify. We didn't take it all at one time. We took about 7 last August. We moved that up to 13% in the fourth quarter and then we moved it up to 17%. So it was done in stages, Jeff, so we could see what the consumer response was. And we just didn't see that much movement. You see a little bit of movement. We did see order had moved up a little bit, but we were pleased with the way that our consumers responded. And we felt strongly all along that that channel, it's a high convenience channel with a high cost and that channel really to bear those costs and we're really happy with the way it ended up. Jeffrey Bernstein: Thank you. Operator: And the next question is from David Palmer from Evercore ISI. Please go ahead. David Palmer: Thanks. Just a quick follow-up on the price elasticity on delivery particularly, what do you think that was? What do you think the volume trade-off was? Jack Hartung: I don't know that there was one that I can measure that accurately David, because we did see delivery ease, but we also saw dining rooms open up as well during those periods. We didn't see much of any resistance back in the third quarter of last year when we took the 7%, when we took out 13%; COVID was starting to worsen as we moved into the holidays. So there is so much noise going on. It's hard to say we lost a specific amount of sales in delivery. So we saw some softness there, but there are other things going on as well. And then of course, our latest price action that was happening when the economy and restaurants were opening up again. But when we look at the net-net at the whole picture of what our overall sales were and then between channels, we're really pleased with the overall sales trends and we're happy with the way the channels have shifted to the point where that shifting is moving back into our highest margin order ahead and our second highest margin come into the restaurant and order. So the way we've ended up throughout the whole last year, as we took these actions, we think we ended up in a really good spot. David Palmer: Yeah, I was going to ask about that mobile order and pick up. It's got very high incremental margins. I would imagine the advantage and because of labor efficiency would be quite large right now and growing because of the cost of labor. How -- It looks like mobile order and pick up mix may be moderated a little bit. Could you talk about that mix and if there’s any plan that you have, you think levers that you can pull with the database that you have to encourage that behavior and possibly help your margins? Thanks. Brian Niccol: Yeah, luckily, the order ahead, business continues to make nice progress. And obviously, as we open more and more Chipotlanes, we see that business get even bigger. And you're right, David, the efficiency of that order or that transaction is the best margin transaction in our business. So we love opening more Chipotlanes. Our marketing team, our digital team, they continue to drive customers to that access point because it's highly convenient. I think actually I just saw some numbers on this where the time from your order to actually your food being ready is now less than 10 minutes in our business. So we've gotten even faster at this space to make it even more convenient. And just to give your perspective, a couple of quarters ago that was in the 12 minute range. So we're getting better and as we continue to provide I think more convenience, more speed, and get more Chipotlanes, you're going to continue to see that occasion continue to grow, and I think it's great for the business and it's great for our customers. David Palmer: Thank you. Operator: The next question is from Nicole Miller with Piper Sandler. Please go ahead. Nicole Miller: Thank you. Good afternoon. I want to ask a little bit about labor and how you're getting informed there. You're obviously ahead of the curve on benefits. But just thinking about some of the decisions you have to make. Let's say, is it digital make line or digital closes? What are you learning about the labor pool? When will you decide if some of those pressures are transitory or not? And if they're not, what would you do? Do wages go up? Do you have to overstaff to account for not enough bodies? Or is it just simply so much demands? Brian Niccol: Yes. Well, so the approach we are taking is we're doing this team by team. So it's a restaurant by restaurant approach and we're fortunate that we've got great leadership throughout our organization. So when you go into a restaurant that is struggling with staffing, we seek out to understand why? Do we have the right leader? Do we have the right culture? Once we understand that, we make sure we've got the right wages, the right benefits, and people understand the true career opportunity to grow at Chipotle. And what we find is -- look, once they -- we know we got the right leader and people get recruited into a great culture. They understand the career growth opportunity. We do a really good job than winning that hiring competition. And then you'll obviously, in each of these markets, we have to make sure that our wages continue to be competitive. And again, this is another opportunity that I think is unique to Chipotle that we've got the ability to move if we need to on a restaurant by restaurant basis and put ourselves always on a strong footing. So we never want to find ourselves falling behind. We always want to be leading when it comes to attracting and retaining the best people. And that's our approach. It's a simple approach. We want the best people, we want to reward it correctly, and then we want them to develop so that they can grow with us. Nicole Miller: Thank you for that. And then I think I actually lost track of price. I think it was 10% in the quarter, but if it's going to be like 200 basis points lower, I either had too much rolling off or maybe some more came on. So could you talk about price? Maybe a little bit of color by month in 3Q and in 4Q? Thanks. Jack Hartung: Yeah. I mean, I'll do it by quarter Nicole, but it's -- it didn't change that much by month either. There's roughly about 10% in Q3, that's going to drop to about 7.5% or so in Q4. And just to remind you guys of the component, 10 sound like a lot. It's the 4% that we took in June to support the higher wages. It's roughly 2.5% related to delivering, that's way to base on our delivery business. There is our national pricing that we took last year that's 2 or a little bit more than 2. And then there's a final piece in this line, which we took some beef back from last year or early this year, when beef prices started to spike. Now beef spiked again so we're behind on that as well. So those are the components. I only break it out that way because all the action we have taken has been much targeted, very specific, and very, very purpose driven. And then we will move down to a -- that 7.5 in the fourth quarter because the -- a good part of the delivery pricing that we took in the third and fourth quarter of 2020 completely rolls off into the end of the fourth quarter. Nicole Miller: Thank you for that. Appreciate it. Operator: And the next question will be from Lauren Silverman with Credit Suisse. Please go ahead. Lauren Silverman: Thanks for the question. On loyalty, can you share any metrics on how customers spend, or frequency changes once customers joined the rewards program? And then I know early, but anything you can share on what you're seeing with Chipotle exchange and extras, and which cohorts you're seeing the greatest responses from? Brian Niccol: Yes, sure. So what we have demonstrated over time is people that are in our rewards program or our loyalty program, they come more often and they spend more. And what we've definitely seen as the rewards program has also, I think, created another level of engagement where those that before weren't participating, now are being influenced with the opportunity of these different incentives, right? Where, I don't know if you are enrolled in our program, but you'll see something like a streak, where you come X number of times, you get a bonus points. The thing that's attractive about that is not everybody wants to wait to redeem for a full-size entree. And this opens the door for them to redeem faster, rewarded for taking action. As we see people continue to engage in the rewards program. So it continues to work really well. Just take advantage of new users, medium users or heavy users that want to engage with the brand. And then we were able to influence their behaviors resulting in more frequency and higher ticket. Lauren Silverman: Thanks. I'm definitely enrolled in the program. One of the best. On staffing, where are you seeing the greatest challenges? Do you see it more in recruiting new staff or retention and any differences that you can call out in the labor environment across markets? Brian Niccol: Yeah. So I would say it kind of ebbs and flows. This is unfortunately the cycle when the restaurant gets understaffed, becomes a much harder job for the individuals that are working there. So we work aggressively to go recruit, train, so that we do retain those that are with us. And I would say the greatest challenge has been when the dining rooms reopened, we needed to staff up quickly to catch up with the demand and that was harder than we had hoped. But luckily, I think we took a lot of right actions where we've got a lot of our restaurants now in goods footing, And now we have these scenarios where things pop up and you have to deal with it accordingly, whether it's exclusions as it relates to COVID or kids going back-to-school. You're in kind of the normal course of having to make sure that you're always recruiting. And then we got to make sure we're getting people trained up, they're being successful in their job, and then they stay with us. And then ultimately, they're able to hopefully get a general manager job and progress into our organization to above-store leadership as well. So our focus has been on making sure that we're getting these restaurants staffed and trained correctly because that's the best remedy for retention. Lauren Silverman: Thank you, guys. Operator: And the next question is from Chris O'Cull with Stifel. Please, go ahead. Chris O’cull: Thanks. Good afternoon, guys. My question relates to Chipotlane. I was hoping you could provide some color on the average volumes, margin, and investment in that format versus the traditional format. And my second question is that given the Chipotlane format really unlocks the use of different real estate sites, how much does the format increase the domestic unit potential of the brand? Jack Hartung: Yeah. Listen, I'll start with the -- their performance. The Chipotlanes typically open up somewhere in that 10% to 15% range higher on sales. Their margin, obviously, it's higher for two reasons. One, because the sales are higher and we know that our higher volume restaurants flow through a higher-margin and then there's also the efficiency that we talked about where much more of the digital business. First of all, the digital business is usually 10% to 15% higher. So if we're doing 45% so say in a non - Chipotlane, we'd be doing 55 or higher in a Chipotlane, and it skews towards order-ahead our highest margin transaction, so the return is much, much better. The incremental investment costs generally is going to be about 75,000, 85,000, something like that. So with those kinds of sales and those kinds of higher margins it's by far a superior return. In terms of Chipotlane, the Chipotlane in the typical restaurant that you'll see open up, it's not any smaller than a typical restaurant, so it doesn't take a different footprint. What we are experimenting with though, is a smaller footprint with the Chipotlane, where we might be able to go into a same location. The same location would be where you've got two restaurants already, They could be very, very high volume restaurants and there just isn't really enough room to economically put a third restaurant in between those 2. Well, if you can reduce the footprint, which reduces the rent, reducing the investment costs. And because we have higher margins with Chipotlane and because customers, more than 50% of them want to go through the Chipotlane order had they picked up. Well, it's mostly digital and almost half of that is order ahead and pick up. We do have an opportunity economically to drop in a restaurant in between those 2 high-volume restaurant. We're in the early days of that. We're just experimenting with that, but we think that that's got some legs going forward, and that, Chris, would be incremental. Those will be deals that we wouldn't have done without the Chipotlane format. Chris O’cull: Just as one follow-up, I know digital-only Chipotlane s are still in the testing phase, but does that format potentially allow you to have a much broader menu with items more -- maybe more difficult to execute than you could in a traditional format? Brian Niccol: I mean, it definitely allows for some additional innovation on the menu as evidenced by our quesadilla. So that's something that I think our culinary team and our marketing team continue to take a look at. Regardless though, you want to -- the one of thing that's great about Chipotle is people can get the customization that they want and also that we can provide it at a really exciting speed. And so, we have to be careful that we don't create complexity that slows us down even in the digital channel, which look, the digital channel gives us some additional flexibility. But I love the fact that we're now closing in on people being able to order off-premise, have their food ready to be there in less than 10 minutes. That's really exciting for us. So we're going to keep an eye on the throughput for digital, just like we keep an eye on the throughput on our frontline. So it definitely opens the door for some things. I just want to make sure you understand that at the end of the day, we still want to have great speed even in our digital business. Chris O’cull: Understood. Thank you. Brian Niccol: Yeah. Operator: And the next question comes from Jared Garber with Goldman Sachs. Please go ahead. Jared Garber: Thanks and appreciate all the commentary on top-line growth and margins specifically. I wanted to switch topics a little bit and think about unit growth here. It seems like the unit growth number in the quarter came in a bit lighter than some of the expectations, but you maintained that full-year guide, just wondering if you could comment on the construction in the permitting environment and what you're seeing from that perspective and if there is any risk that some of these new units needs to get pushed out into next year. Jack Hartung: Yeah Jared. I made a few comments in the prepared comments as well, but it's a challenge. It's a challenge in all the areas you just mentioned. It's a labor challenge for our contractors and it's a material challenge, and it's also a permitting challenge. It's one reason why we mentioned that even though we've opened 137 restaurants so far, we've got about 110 or over 100 restaurants are under construction. There's not a risk that we won't get to 200 openings, I don't think there is a risk that we won't get to or beyond 200, but more than a previous year, more than a typical year, there's timing risk in that. And so I think we'll get to that 200 plus. I think it gives you an idea of how robust our pipeline was. Without these timing risks, we would've been well beyond 1,200 -- well, well beyond the 200. For next year, I also mentioned that we've got a very robust pipeline. So the good news here is our pipeline is really, really, really strong. We're doing everything we can to try to work through the timing issues like we're pre -ordering supplies, for example, so that we're not going to run out because we're pre -ordering things. We're doing everything we can to work with our contractors. But if they have short labor or if they have exclusion because people are exposed to COVID, the construction site is going to shut down. Those are things that are just unavoidable. We're navigating as best we can through that. But most important is the pipeline is really, really strong. The quality when we open up these restaurants is really, really good. So it gives us great optimism and the timing issues, we're just going to navigate the best we can. Jared Garber: Thanks. I really appreciate the color there. And then just one more sort of on that. I know you're kind of holding off on giving '22 guidance in terms of unit growth, which you typically do in the third quarter, but fully understand the volatile environment there. If you were to think about sort of a normalized environment without some of these timing issues, and especially as it relates to kind of the very healthy cash balance you have. Is there any reason that outside of, again, COVID -specific or supply chain impacts; we shouldn't be starting to think about accelerating levels of unit growth in '22 and maybe even '23 and beyond? Jack Hartung: Yeah, listen; our pipeline will support that acceleration. So then it really does come down to timing. And it's not just about the capital. I mean, just because we have the capital doesn't mean we'll accelerate pace. It's a combination of good sites are available, the openings are strong. We're getting now up to 75% of our new openings are Chipotlane, which you heard us talk about the performance there, so there's every reason to continue to invest in the success. And so you definitely will see some acceleration. Jared Garber: Awesome. Thanks so much. Operator: And the next question is from John Tower from Wells Fargo. Please go ahead. John Tower: Awesome. Thanks for taking the questions. I've got a few. So just a clarification first on the fourth quarter same-store sales guidance. Right now, are you guys trending towards the higher end of that range given you're expecting some mix shift lower as well as some pricing rolling off? Jack Hartung: Yeah. October results are good so far. So we didn't see a fall-off at all in October. But in terms of the range, there's a lot of uncertainty going on. We still have 2.5 months ago, so I'd hate to want to be more specific at this point. John Tower: Got it. And then just go into the, I think question earlier or some of the labor challenges you alluded to in the press release and on the call, did that impact same-store sales, specifically throughput at all during the quarter? Brian Niccol: I mean, look, obviously a fully staffed restaurant outperforms an understaffed restaurant. One of the things that's terrific for our business though, is the fact that we have most of the digital mainline in the front line, we're able to flex that digital mainline so that we can keep the integrity of our front-line experience. So we never have to close our restaurants. And what we're able to do is then allocate accordingly. The other thing that we've learned that's another benefit of this digital business is we have restaurants within a couple of miles of each other and delivery; it doesn't get impact if you ship from one restaurant to another. So we have to throttle back our digital business in one restaurant because we're a little light on staffing so that we can keep the frontline running smoothly. The good news is we got another restaurant right around the corner that is able to fulfill that digital order. And so we don't see a lot of drop-off in the business that way. But at the end of the day, I wish all our restaurants were fully staffed and I know we're missing sales because not all of the mark will be staffed. So there is still upside in getting our staffing solved in every single restaurant. The good news is we're in really good shape for the majority of our restaurants. Our teams have done a phenomenal job, and it's going to be something that we're going to continue to work hard. And we're -- it's one of those things where it's not going to get any easier. So therefore, we have to continue to get better at recruiting, training, and keeping these restaurants staffed. So we're fortunate that we've got these two businesses and we've got the flexibility, but I wish every restaurant was staffed. It'd be a better job for everybody. And it'd be a better experience for every customer. John Tower: Got it. Thank you. And then just one more follow-up on the pricing decision. Can you walk us through how you're thinking about the fourth quarter, or maybe it's not even in the fourth quarter, but in terms of taking incremental price from here, is it the belief that you're going to see protein inflation well into '22, and therefore, it makes more sense for pricing to be taken now or -- I guess, can you walk us through the thinking around why or why not to take any more pricing sooner rather than later? Brian Niccol: Yeah, I think, the one thing that Jack mentioned is this, we traditionally always look at how we want to approach pricing for the next year in the fourth quarter. One of the things we're obviously evaluating is where is labor going to land, not just in our restaurants but across a lot of our suppliers. We don't see wages as one of those things that are temporary and going backwards. Now, there’s other thing like freight and some of those things where we think those are more temporary. So we're -- we just want to understand what those things are. And the good news is we got a great value proposition so that if we realize we need to take a little more or take a little less, we have the flexibility to do it. And then when you marry that up with all the growth that we have in this business, we don't want to get ahead of the pricing if we don't need to. So we're not afraid to use our value proposition, but I want to use it when we really have to use it. And we've demonstrated that if we need to take pricing, we will and the business has the pricing power to do it. But we want to make sure we're taking pricing because it's stuff that's permanent, not stuff that's temporary. And we also want to think about how we blend that with all the growth and other cost-saving initiatives we've got going on. John Tower: Got it. Thank you. Operator: And the final question today will be from Dennis Geiger with UBS. Please, go ahead. Dennis Geiger: Great. Thank you. Brian, just wanted to ask a little bit more on some of the key incremental drivers of sales growth over maybe the coming months and quarters. Just curious based on what you've said, if it's kind of fair to think about incremental benefits from a few, I guess, including that dining room of traffic goes from 80% to 100 at some point. digital sales remain incremental in that scenario, obviously, the additional pricing that you just spoke to, I guess stepping up and maybe the efficiency from the cruise just getting better as dining room traffic comes back. Curious if it's fair to think about all of those as incremental from here and then if there's any others that you would call out above and beyond everything that's been working and supporting momentum to date? Thank you. Brian Niccol: Yeah. Sure. So look, I definitely think you've touched on a lot of them, which is we still have opportunities for better throughput on our frontline. I just mentioned that we're continuing to get faster on our digital business. So just running the operation to your point, as we continue to get more fully staffed with more trained, well-developed people executing against the 3 pillars of throughput that we know we need to execute, there is upside in the business there. There is also upside in the strategies that I outlined in the beginning of the conversation today, which is we're going to continue to take advantage of our huge and growing rewards program. We've got -- we're closing in on 25 million, we're at 24.5 million. That's like a 40% increase versus where we were a year ago this time. So obviously, it's not going to continue to grow at that clip, that database. But we are growing is our capability and taking advantage of that database to drive behavior, engagement, commitment to our business. Obviously, we will continue to smartly use menu and culinary innovation. So that's not going to stop. And when you think about our access that we're providing to people, I think our value proposition is going to really shine through going forward. So I just think that's another huge advantage. Even as I look around, I would put our chicken burritos up against a lot of food out there. And when you start to look at where pricing is going and a lot of other menus, our value proposition, I think, looks even more compelling. So I don't know what that's worth, but what I do know is I like being in a position of a really strong value proposition going forward given the environment that I think we're all going to be facing. Dennis Geiger: Great. Thank you. Operator: Ladies and gentlemen. This concludes our question-and-answer session. I would like to turn the conference back over to Brian Niccol for any closing remarks. Brian Niccol: Yeah. Thank you. And thanks everybody for joining the call and thank you for all the questions. Obviously, very proud of our results for the third quarter and I think it speaks volumes to our strategy, our culture, and our ability to commit ourselves to great execution in a constantly evolving environment. I continue to be very optimistic about our ability to get to $3 million plus AUVs with really, I think, impressive earnings growth behind that. So I'm very confident that we're focused on the right strategies. There's a lot of growth in those strategies. And then I love what our innovation pipeline is looking like, whether it's experimentation in new assets, cost opportunities, international. There's just a lot of growth in our business both in the U.S., from a new unit standpoint as well as average unit volumes. And then as you think about the model that we take outside the U.S. So very proud of the team. A huge thank you to them again. It's been a challenging environment, but I think we're demonstrating the strength of the Chipotle culture, the Chipotle purpose. If you don't have those things, I don't think you get the results that our Company was able to achieve in the most recent quarter. So thank you again for taking the time and we'll talk to you next quarter. Take care. 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.