10-QPeriod: Q3 FY2015

CHIPOTLE MEXICAN GRILL INC Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 21, 2015For Securities:CMG

Summary

Chipotle Mexican Grill, Inc. (CMG) reported strong top-line growth in the third quarter and the first nine months of 2015, driven by new restaurant openings and an increase in comparable restaurant sales. Revenue for the three months ended September 30, 2015, rose 12.2% to $1.217 billion, while the nine-month period saw a 15.3% increase to $3.504 billion. This growth was supported by a 5.5% increase in comparable restaurant sales for the nine months, primarily attributed to higher average checks, including the impact of menu price increases, and a lesser extent, increased customer visits. The company also saw an improvement in its food, beverage, and packaging costs as a percentage of revenue, benefiting from lower avocado and dairy prices, and menu price adjustments. However, labor costs as a percentage of revenue increased due to wage inflation and scheduling inefficiencies. Despite these pressures, net income grew to $144.9 million for the quarter, up from $130.8 million in the prior year. The company continued its share repurchase program, demonstrating confidence in its financial position and commitment to returning value to shareholders.

Financial Highlights

42 data points
Beta

Net Income

$144.88M

EPS (Diluted)

$0.09

Total Assets

$2.95B

Cash & Equivalents

$604.16M

Free Cash Flow

$119.99M

Financial Statements
Beta
Operating Expenses$982.13M
Operating Income$234.76M
Net Income$144.88M
EPS (Basic)$0.09
EPS (Diluted)$0.09
Shares Outstanding (Basic)1.56B
Shares Outstanding (Diluted)1.58B

Key Highlights

  • 1Revenue increased by 12.2% to $1.217 billion for the third quarter of 2015 and by 15.3% to $3.504 billion for the nine months ended September 30, 2015.
  • 2Comparable restaurant sales increased by 5.5% for the first nine months of 2015, driven by higher average checks and increased customer visits.
  • 3Food, beverage, and packaging costs decreased as a percentage of revenue to 33.0% in Q3 2015 from 34.3% in Q3 2014, benefiting from lower commodity prices and menu price increases.
  • 4Net income grew to $144.9 million ($4.59 diluted EPS) for the third quarter of 2015, up from $130.8 million ($4.15 diluted EPS) in the prior year.
  • 5The company opened 150 new restaurants during the first nine months of 2015 and anticipates opening 215-225 for the full year 2015.
  • 6Chipotle repurchased $147.1 million of its common stock during the first nine months of 2015, with $155.1 million remaining authorization as of September 30, 2015.
  • 7The company is actively working to resolve supply chain challenges, particularly with pork for carnitas, and expects to have sufficient supply for all restaurants by the end of 2015.

Frequently Asked Questions

Chipotle's revenue growth in the third quarter of 2015 was primarily driven by two factors: the opening of new restaurants and an increase in comparable restaurant sales. New restaurant openings contributed significantly, alongside a 2.6% increase in comparable restaurant sales for the quarter, which was fueled by higher customer visits and menu price adjustments.

Chipotle experienced an improvement in its food, beverage, and packaging costs as a percentage of revenue during the third quarter of 2015. This was attributed to favorable pricing for avocados and dairy products, as well as the impact of menu price increases implemented during the quarter. These benefits helped offset increases in beef and packaging costs.

Chipotle showed strong commitment to expansion, opening 150 new restaurants in the first nine months of 2015. The company projected opening between 215 to 225 new restaurants for the full year 2015 and expected an even higher range of 220 to 235 for 2016, indicating continued aggressive growth plans.

While the provided excerpt focuses on financial performance, Note 7 of the Financial Statements mentions ongoing investigations by the U.S. Securities and Exchange Commission and the U.S. Attorney's office regarding employee work authorization verification. The company stated it is cooperating and cannot determine potential liabilities. Separately, a pork supplier issue impacted carnitas availability, but the company expected to resolve this by the end of 2015 with a new supplier.