Chipotle Mexican Grill
) announced its Q4 and full year results Tuesday, February 5. Its
total revenues jumped 17.2% to $699.2 million, helped by
new restaurant openings and a 3.8% increase in the same-store
sales. Net income rose 6.8% to $61.4 million or $1.95 a share,
up from $1.81 a share.
The company opened 60 restaurants in the quarter to raise its
total count to 1,410. Chipotle reaffirmed its goal of adding
165-180 restaurants in 2013, including four in international
markets. The company will also open a second outlet of its
Asian-cuisine venture, ShopHouse Kitchen, in Los Angeles, in the
first half of 2013 itself.
See full analysis for Chipotle Mexican Grill
Margins Under Pressure
In January, Chipotle had warned that rising food costs were
biting into its margins. The cost of food, beverage and packaging,
accounted for 33.5% of the sales, up 1.3% from the fourth quarter
of 2011. Apart from the higher commodity costs, the lack of higher
menu prices is squeezing the margins. As a result, operating
margins declined 150 basis points to 24.6%.
The company should get some respite once it raises its prices,
which could be as early as in the summer of 2013. The
restaurant chain has been reluctant to raise menu prices for a
while now fearing that it might drive away customers to its rivals.
Chipotle's competition intensified in 2012, when Taco Bell
introduced a new Cantina Bell menu consisting of burritos and
burrito bowls at prices lower than Chipotle's.
For 2013, management expects the same-store sales to be in the
region of flat to low single-digit, excluding the impact of rise in
menu price. Same-store sales growth is an important parameter
to gauge a restaurant chain's performance since it only includes
restaurants open for more than a year. The sales of newly opened
restaurants could be unusually high or low and can distort the
overall revenue/store figure.
Besides the restaurants, recently introduced
by Chipotle, will also contribute to the top line, although it is
not clear yet as to how much. In an attempt to further build the
Chipotle brand and drive more customers to the stores, the
company's CEO, Steve Ells, said that the advertisement spend will
rise to 1.7% of the revenues (from 1.3% in 2012), and will also
feature the new catering service.
We have a price estimate of $313 for Chipotle Mexican Grill, but
we are in the process of revising our estimate to incorporate the
How a Company's Products Impact its Stock Price at Trefis