10-QPeriod: Q3 FY2011

CHIPOTLE MEXICAN GRILL INC Quarterly Report for Q3 Ended Sep 30, 2011

Filed October 21, 2011For Securities:CMG

Summary

Chipotle Mexican Grill Inc. (CMG) reported strong financial performance for the nine months ended September 30, 2011, driven by a combination of new restaurant openings and comparable restaurant sales growth. Revenue increased by 23.6% year-over-year, reaching $1.67 billion, while net income grew by 18.8% to $157.5 million. The company expanded its restaurant footprint significantly, opening 83 new locations during the period, bringing the total to 1,163. Comparable restaurant sales increased by 11.2%, fueled by higher customer visits and strategic menu price adjustments. Despite increased food costs, which rose to 32.7% of revenue due to inflation in key ingredients like avocados, beef, and chicken, Chipotle managed to improve its operating margins. Labor costs as a percentage of revenue decreased due to higher average restaurant sales. The company also continued its share repurchase program, buying back $41.8 million in stock. Looking ahead, CMG anticipates continued comparable restaurant sales growth in the low double digits for the full year 2011, though moderating to low single digits in 2012 due to economic uncertainties. The company remains focused on its "Food With Integrity" vision and expanding its store base, with plans to open 135-145 restaurants in 2011 and 155-165 in 2012.

Financial Highlights

43 data points
Beta

Net Income

$60.43M

EPS (Diluted)

$0.04

Total Assets

$1.34B

Cash & Equivalents

$409.88M

Free Cash Flow

$80.97M

Financial Statements
Beta
Operating Expenses$493.84M
Operating Income$98.01M
Net Income$60.43M
EPS (Basic)$0.04
EPS (Diluted)$0.04
Shares Outstanding (Basic)1.57B
Shares Outstanding (Diluted)1.59B

Key Highlights

  • 1Revenue for the nine months ended September 30, 2011, increased by 23.6% to $1.67 billion, compared to $1.35 billion in the prior year.
  • 2Net income for the nine-month period grew by 18.8% to $157.5 million, or $4.96 per diluted share.
  • 3The company opened 83 new restaurants in the first nine months of 2011, expanding its total unit count to 1,163.
  • 4Comparable restaurant sales increased by 11.2% for the nine months ended September 30, 2011, driven by customer traffic and menu price increases.
  • 5Food, beverage, and packaging costs as a percentage of revenue increased to 32.7% from 30.4% in the prior year, primarily due to inflation in ingredient costs.
  • 6Chipotle continued its share repurchase program, acquiring $41.8 million worth of stock during the first nine months of 2011.
  • 7The company's cash and cash equivalents balance grew significantly to $409.9 million as of September 30, 2011, up from $224.8 million at the end of 2010.

Frequently Asked Questions

Chipotle's revenue growth was primarily driven by two factors: the opening of new restaurants and increases in comparable restaurant sales. The company opened 83 new restaurants during the first nine months of 2011, and comparable restaurant sales saw an 11.2% increase, attributed to higher customer visits and menu price adjustments.

Food, beverage, and packaging costs increased to 32.7% of revenue, up from 30.4% in the prior year, due to inflation in key ingredients like avocados, beef, and chicken. While this put pressure on margins, the company managed to offset some of this impact through menu price increases and improved operating leverage in other cost areas, such as labor and occupancy.

Chipotle expects to open between 135 to 145 restaurants in 2011 and 155 to 165 in 2012. For comparable restaurant sales, the company anticipates full-year 2011 growth in the low double digits, moderating to low single digits in 2012 due to economic uncertainties and challenging comparisons with the strong 2011 performance.

The company is involved in ongoing legal proceedings, including class-action lawsuits related to the Americans with Disabilities Act (ADA) concerning serving line wall height and alleged violations of state laws regarding employee record-keeping and breaks. Additionally, there is an ongoing investigation by the U.S. Department of Homeland Security (DHS) and the U.S. Attorney's office concerning employee work authorization documents. While management believes its practices are in compliance with applicable law and does not expect a material adverse effect, these matters introduce some level of uncertainty.