We maintain our Neutral recommendation on restaurants chain
Chipotle Mexican Grill, Inc.
). Though we prefer the company's strong brand potential and
efforts to expand beyond the U.S., a sluggish restaurant industry
keeps us on the sidelines at the current level.
Why the Reiteration?
Chipotle, which works within 2 higher-growth segments of the
restaurant industry: the fast-casual and the Mexican food
segments, is considered the most recognized restaurant in the
U.S. Chipotle delivered positive comparable sales (comps)
consistently in the past 4 quarters despite the recent economic
downturn, which helped it to achieve a stable position in the
In addition, Chipotle's various proactive initiatives such as
'Food With Integrity' program, innovative marketing strategy, new
catering and loyalty programs and food-quality enhancement agenda
continue to spur growth. Chipotle expects that these initiatives
will drive its comps growth in ensuing quarters.
Chipotle also remains steadfast in its goal to continuously
expand its business globally. Since the company has 11
international stores across Canada, London and Paris, we believe
it still has plenty of room to grow internationally. In 2012, the
company unveiled183 new units, reflecting a 25% expansion over
the past year. For 2013, the company plans to open 165 to 180 new
However, Chipotle is concerned about increasing food and
beverage costs. In this regard, the cost of beef and cheese
remains a major concern and is currently showing no signs of
Moreover, although the industry is showing signs of
improvement and restaurant operators are reporting positive
traffic, the pace of economic recovery is slow and consumer
spending remains low due to high interest rates and
still-constricted credit availability.
Other Stocks to Consider
Some other restaurant industry stocks with a favorable Zacks
Red Robin Gourmet Burgers Inc.
Cracker Barrel Old Country Store Inc.
), both carrying a Zacks Rank #1 (Strong Buy), and
Burger King Worldwide Inc.
) carrying a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis
CRACKER BARREL (CBRL): Free Stock Analysis
CHIPOTLE MEXICN (CMG): Free Stock Analysis
RED ROBIN GOURM (RRGB): Free Stock Analysis
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