Chipotle earnings misses estimates on revenue, earnings, same-store sales
Chipotle Mexican Grill (CMG) reported quarterly results that missed expectations on Tuesday, sending shares down more than 5% in after-hours trading.
In its fourth-quarter results, Chipotle posted same-stores sales that missed expectations as the company navigated a "challenging and fluid macro environment," Chairman and CEO Brian Niccol said in the release.
Here's what the California-based burrito chain reported, compared to Wall Street estimates, according to Bloomberg:
Revenue: $2.2 billion versus $2.23 billion
Adjusted earnings per share: $8.29 versus $8.91 per share
Same-store sales: up 5.6% versus 7.04%
In the quarter, which ended December 31, 2022, total revenue increased by 11.2% to $2.2 billion. The increase was driven by an increase in same-store sales of 5.6% and new locations opening.
Last quarter, Chipotle opened 100 new restaurants with 90 of them including its drive-thru concept, a Chipotlane. In the earnings release, the company said these formats typically provide an "increase new restaurant sales, margins, and returns."
In-restaurant sales increased 17.5% in the fourth-quarter. While the company reported an operating margin of 13.6%, lower than consensus estimates of 14.7%. In Q4 foot traffic dropped 10.2%, compared to 2021, per analytics company Placer.ai.
For the full fiscal year, revenue came in higher, up 14.4%, to $8.6 billion, while same-store sales increased 8.0%. Operating margin was up 13.4%, up from 10.7%. Restaurant level operating margin was also up 23.9%, up 130 basis points.
The cost of foods, packaging and beverages weighed on the company this quarter, accounting for 29.3% of total revenue. However, that was down 230 basis points compared to the fourth quarter of 2021.
An increase in menu prices and "to a lesser extent, lower avocado prices" help to offset inflation that hit the menu last quarter including higher costs for dairy and tortillas, the company said.
In August of 2022, Chipotle raised menu prices 4%. That was the third time in 15 months.
Restaurant level operating margin was up 24% from this time last year, 20.2%, which the company said was "primarily due to the benefit of sales leverage and, to a lesser extent, lower delivery fees associated with a lower volume of delivery transactions, partially offset by wage inflation and higher food costs."
Digital sales accounted for 37.4% of food and beverage revenue in the fourth quarter and 39.4% for the full-year.
Analysts are also keeping an eye on next quarter.
Dennis Geiger of UBS expects "better traffic this burrito season," which Chipotle says calls its busy season (March to May). The firm has a Buy rating and price target of $1,800.
Ahead of that, the burrito chain recently announced plans to hire 15,000 workers.
In the full-year 2022, the company opened 236 locations with 202 of them including a Chipotlane. For 2023, the company plans to open more than last year, with a range of 255 to 285 new locations, including 10 to 15 re-locations to add a Chipotlane, assuming "utility, construction, permit and material supply delays do not worsen." This is one step of the company's long-term goal to reach 7,000 locations in North America.
CEO Niccol re-emphasized that goal in the release.
"Our continued focus on recruiting and retaining the best people, delivering Chipotle's operational standards with delicious food prepared fresh daily uniquely positions Chipotle to successfully expand to 7,000 restaurants over the long term," he said.
Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at firstname.lastname@example.org.
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