Solid Earnings, Ample Cash Push Chipotle Stock Higher

Evie Liu Earnings Report Consumer CMG Chipotle Mexican Grill Lodgings/Restaurants/Bars Restaurants/Cafes/Fast Food Places Limited-Service Restaurants/Cafes Leisure/Arts/Hospitality Brian Niccol Financial Performance Earnings Corporate/Industrial News Content Types Factiva Filters C&E Industry News Filter CMG I/RES M/LEAH N/CNW N/DJN N/ERN N/PFM N/WER Barrons.com Barrons Blogs Wires CODES_REVIEWED Companies Consumer Coronavirus Earnings Report Markets author Evie Liu author|Evie Liu topicid 8574 name Evie Liu extractedtext Evie Liu rank 1 codetype author code evie_liu nameformat surname_first author Evie Liu id Evie Liu barrons_display_brand BAREARNREP barrons_display_brand|BAREARNREP codetype BARRONS_DISPLAY_BRAND canbedisplaybrand true value BAREARNREP source MANUAL status modified name Earnings Report code BAREARNREP barrons_display_subject BARCONSUMER barrons_display_subject|BARCONSUMER codetype BARRONS_DISPLAY_SUBJECT canbedisplaysubject true value BARCONSUMER source MANUAL status 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on Solid Earnings and a Strong Cash Position

Comparable restaurant sales increased 14.4% in the first two months of the year, but fell 16% in March. Analysts polled by FactSet had expected 4.4% same-store sales growth for the first quarter.

Solid Earnings, Ample Cash Push Chipotle Stock Higher

Chipotle Mexican Grill reported its first-quarter financial results on Tuesday after the market closed and the stock was rising sharply in after-hours trading.

http://marketwatch.com/story/chipotle-to-pay-largest-ever-food-safety-fine-25-million-for-illness-outbreak-that-sickened-1100-2020-04-21?siteid=yhoof2&yptr=yahoo mailto:evie.liu@barrons.com Chipotle Stock Is Rising on Better-Than-Expected Earnings and a Strong Cash Position By Evie Liu Photograph by Joe Raedle/Getty Images Chipotle will pay $25 million to settle the criminal charges related to the food-borne illness outbreaks.

Chipotle Mexican Grill reported its first-quarter financial results on Tuesday after the market closed and the stock was rising sharply in after-hours trading.

Chipotle’s revenue in the first three months of 2020 rose 7.8% to $1.4 billion from a year earlier, largely in line with analysts expectations.

The food chain (ticker: CMG) noted that about 100 of its restaurants—mainly inside malls and shopping centers—are temporarily closed as a result of the Covid-19 lockdown. The closings didn’t occur until late in the quarter.

Same-store sales increased 3.3% over the course of the quarter, dragged down by results for March when the lockdowns took hold. Comparable restaurant sales increased 14.4% in the first two months of the year, but fell 16% in March. Analysts polled by FactSet had expected 4.4% same-store sales growth for the first quarter.

Digital sales jumped more than 80% in the quarter. “Investing in digital over the last several years has allowed us to quickly pivot our business with [first quarter] digital sales reaching our highest ever quarterly level of $372 million,” CEO Brian Niccol said in a statement. Digital sales accounted for 26.3% of the total in the quarter.

Adjusted diluted earnings per share came at $3.08, a 9.4% decrease from $3.40 a year earlier. That was better than analysts’ projection of $2.88 per share.

But sales and earnings in the first quarter aren’t what matter for most investors. They are looking farther down the time horizon trying to determine which companies can survive the pandemic with less harm and recover strongly when the economy reopens and things start getting back on track.

Chipotle, like many other companies, has withdrawn its previous fiscal 2020 guidance, citing the uncertainty surrounding Covid-19’s future impact on the broader U.S. economy and the company’s operations. Analysts polled by FactSet are looking at around $10 a share for 2020 earnings, down from $18 a month ago.

Chipotle also offered the latest update of its balance sheet. It had $909.2 million in cash, restricted cash, and short-term investments—and no debt—as of the end of March. The company said it implemented a number of actions to reduce cash outlays and expenses, including the suspension of stock buybacks. It doesn’t intend to take part in the Paycheck Protection Program loan provision under the recently passed Cares Act, but expects to see added liquidity of about $100 million primarily from tax deferrals as allowed by the Act. The company said it should have enough cash to sustain it for well over a year.

The balance sheet will see a $25 million drawdown this year, though, as Chipotle agreed to a deferred-prosecution agreement to settle the criminal charges against it related to the food-borne illness outbreaks that sickened more than 1,100 people between 2015 and 2018, according to a statement from the Justice Department earlier in the day. This was confirmed in Chipotle’s earnings statement later Tuesday, which said the $25 million fine—largest ever for a food-safety case—consists of a $10 million payment by June 1, 2020, followed by three separate payments of $5 million each to be paid every 30 days after the first payment.

Write to Evie Liu at evie.liu@barrons.com