Chipotle Lags Estimate, Grows Y/Y - Analyst Blog


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Chipotle Mexican Grill Inc. ( CMG ) has reported fourth-quarter 2011 earnings of $1.81 per share, missing the Zacks Consensus Estimate by 2 cents but improving from the year-earlier earnings of $1.47. In full-fiscal 2011, earnings were $6.76 per share versus $5.64 in the prior year.

The fast food restaurant chain reported fourth quarter revenues of $596.7 million, up 23.7% year over year, driven by new restaurant openings and higher comparable store sales (comps). In full-fiscal 2011, revenue increased 23.6% to $2.27 billion year over year.

Quarter Highlights

Comps registered an 11.1% growth in the quarter backed by higher traffic and menu price hike. Higher menu prices added about 4.9% in the quarter under review. Comps were also the beneficiary of favorable weather in December compared to winter storms in 2010. However, comps fell 20 basis points (bps) sequentially and 150 bps annually.

The restaurant operating margin expanded 20 bps to 26.1%, attributable to a 100-bp cut in labor and 50-bp drop in occupancy costs, partially offset by a 120-bp rise in food, beverage and packaging costs and a 30-bp increase in other operating costs (as a percentage of total revenue).

Total operating margin also expanded to 15.7% from 15.3% in the year-ago quarter despite an increase in general and administrative (G&A) expenses. G&A expenses were 6.4% of revenue, up 40-bp from the prior-year period affected by an increase in non-cash stock-based compensation expense.

Stores Update

During the quarter under review, Chipotle opened 67 restaurants. The company currently operates 1,230 outlets.

Chipotle has remained largely unruffled by the recent economic slowdown. The company plans to open 155-165 new restaurants in fiscal 2012.

Financial Position

Chipotle ended the quarter with cash and cash equivalents of $401.2 million and shareholders' equity of $1,044.0 million.


For fiscal 2012, management expects mid single-digit comparable store sales growth, compared with its previous expectation in the low single-digit range. Food costs are expected to escalate by mid single digits, sequentially.

Our Take

We believe Chipotle is well positioned to expand rapidly while generating improved earnings. The Zacks Consensus Estimates for the upcoming quarter and fiscal 2012 are $1.90 and $8.69 per share, respectively, reflecting year-over-year growth of 30.0% and 28.5%.

However, the company's raised comps expectations for 2012 appear attainable but are still less than the double-digit comps recorded in each quarter of 2011.

Chipotle, which competes with Panera Bread Co. ( PNRA ), currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are maintaining our long-term Neutral recommendation on the stock.

CHIPOTLE MEXICN ( CMG ): Free Stock Analysis Report
PANERA BREAD CO ( PNRA ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: CMG , PNRA

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