10-KPeriod: FY2019

CHIPOTLE MEXICAN GRILL INC Annual Report, Year Ended Dec 31, 2019

Filed February 5, 2020For Securities:CMG

Summary

Chipotle Mexican Grill, Inc. (CMG) filed its 2019 10-K on February 4, 2020, showcasing a year of significant revenue growth and strategic investments in digital capabilities and brand enhancement. The company reported a 14.8% increase in revenue to $5.6 billion, driven by an 11.1% rise in comparable sales, indicating strong customer traffic and an increasing average check size. The report highlights Chipotle's focus on its "Food With Integrity" mission, emphasizing responsibly sourced ingredients and classic cooking methods. Strategic initiatives in 2019 included the national rollout of its "Chipotle Rewards" loyalty program, which has garnered over 8 million members, and the expansion of digital ordering and delivery options, with digital sales now representing 18% of total revenue. The company is also prioritizing innovation through a stage-gate process and investing in operational improvements like digital make-lines and Chipotlanes to enhance guest experience and throughput.

Financial Highlights

47 data points
Beta

Revenue

$5.59B

Net Income

$350.16M

6.3% Net Margin

EPS (Diluted)

$0.25

Total Assets

$5.10B

Cash & Equivalents

$480.63M

Free Cash Flow

$387.72M

Financial Statements
Beta
Revenue$5.59B
Operating Expenses$5.14B
Operating Income$443.96M
Net Income$350.16M
EPS (Basic)$0.25
EPS (Diluted)$0.25
Shares Outstanding (Basic)1.39B
Shares Outstanding (Diluted)1.41B

Key Highlights

  • 1Revenue grew 14.8% to $5.6 billion in 2019, with comparable sales increasing by 11.1%, driven by a 7.0% rise in transactions.
  • 2Digital sales accounted for 18.0% of total revenue, up from 10.9% in 2018, reflecting successful investments in digital platforms and delivery capabilities.
  • 3The Chipotle Rewards loyalty program successfully launched and amassed over 8 million members, providing valuable customer data for engagement and marketing.
  • 4140 new restaurants were opened in 2019, including 56 with Chipotlanes, and the company plans to open 150-165 new restaurants in 2020, indicating continued expansion.
  • 5Restaurant operating costs as a percentage of revenue decreased by 180 basis points to 79.5%, driven by sales leverage, although partially offset by higher food and delivery expenses.
  • 6Diluted EPS significantly increased to $12.38 in 2019, compared to $6.31 in 2018, benefiting from revenue growth and a reduction in certain one-time costs compared to the prior year.
  • 7The company continues to emphasize its "Food With Integrity" mission, focusing on sourcing high-quality, responsibly raised ingredients, although challenges in consistent supply were noted.

Frequently Asked Questions

Chipotle's revenue growth in 2019 was primarily driven by an 11.1% increase in comparable restaurant sales, which included a 7.0% rise in comparable restaurant transactions and a 4.1% increase in average check. Additionally, the opening of 140 new restaurants contributed to the overall revenue increase.

Chipotle has significantly invested in its digital capabilities, including rolling out digital pickup shelves, digitizing nearly all its digital make-lines, and expanding delivery to over 98% of its store base. This has led to digital sales growing to 18.0% of total revenue in 2019, up from 10.9% in 2018, demonstrating increased customer adoption of digital ordering and delivery.

Key risks identified include food safety concerns and potential food-borne illnesses, which have historically impacted the brand and could continue to do so due to the company's use of fresh ingredients and traditional cooking methods. Other significant risks involve cybersecurity breaches and data privacy incidents, IT system failures, intense competition in the fast-casual sector, rising labor and ingredient costs, and the ability to effectively manage growth and maintain company culture.

Chipotle's capital allocation priorities include investing in new restaurant development, enhancing existing restaurants, and pursuing strategic initiatives. The company also has a history of repurchasing its common stock, with $69.4 million available under repurchase authorizations as of December 31, 2019, and an additional $100 million authorized shortly after year-end. Chipotle does not currently pay dividends and intends to retain earnings for business growth.