10-QPeriod: Q3 FY2020

CHIPOTLE MEXICAN GRILL INC Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 28, 2020For Securities:CMG

Summary

Chipotle Mexican Grill Inc. (CMG) reported its third-quarter 2020 results, demonstrating resilience amidst the COVID-19 pandemic. The company saw a 14.1% increase in total revenue to $1.6 billion, driven by an 8.3% rise in comparable restaurant sales. This growth was supported by a significant surge in digital sales, which grew by 202.5% to $776.4 million, accounting for 48.8% of total sales. Despite inflationary pressures on certain food costs and increased delivery expenses, Chipotle managed its costs effectively. Labor costs as a percentage of revenue decreased due to sales leverage and improved efficiency, and occupancy costs also saw a slight decrease as a percentage of revenue. Diluted earnings per share stood at $2.82, though this figure was impacted by $0.94 in after-tax expenses related to legal proceedings, impairments, and restructuring. The company's strong cash position and undrawn credit facility provide ample liquidity for future investments, including the continued expansion of its successful "Chipotlane" drive-through format.

Financial Highlights

46 data points
Beta

Revenue

$1.60B

Net Income

$80.24M

5.0% Net Margin

EPS (Diluted)

$0.06

Total Assets

$5.63B

Cash & Equivalents

$662.40M

Free Cash Flow

$162.49M

Financial Statements
Beta
Revenue$1.60B
Operating Expenses$1.49B
Operating Income$107.10M
Net Income$80.24M
EPS (Basic)$0.06
EPS (Diluted)$0.06
Shares Outstanding (Basic)1.40B
Shares Outstanding (Diluted)1.42B

Key Highlights

  • 1Total revenue increased by 14.1% to $1.6 billion in Q3 2020 compared to Q3 2019.
  • 2Comparable restaurant sales grew by 8.3% in Q3 2020.
  • 3Digital sales experienced substantial growth of 202.5%, reaching $776.4 million and representing 48.8% of total revenue.
  • 4The company opened 44 new restaurants in Q3 2020, with 26 featuring the successful "Chipotlane" drive-through format.
  • 5Diluted EPS was $2.82, but included $0.94 in after-tax expenses related to legal, impairment, and restructuring costs.
  • 6Chipotle maintained a strong liquidity position with $1.1 billion in cash and investments and $600 million in an undrawn credit facility.
  • 7The company temporarily suspended its stock buyback program in March 2020 but had $115 million remaining authorization as of September 30, 2020.

Frequently Asked Questions

COVID-19 presented challenges, including temporary restaurant closures and dining room restrictions, and increased delivery expenses and certain food costs like beef. However, the company adapted by enhancing safety protocols, focusing on digital sales (which surged over 200%), and controlling costs. While operations were affected, revenue and comparable sales showed positive year-over-year growth.

The "Chipotlane" is a drive-through format designed to enhance guest access and convenience, particularly for digital orders. In Q3 2020, 26 of the 44 new restaurants opened featured a Chipotlane, and the company reported that this format is performing very well, contributing to increased new restaurant sales, margins, and returns. It's a key component of their strategy to expand their restaurant base.

Chipotle temporarily suspended its stock repurchase program in March 2020 due to the COVID-19 pandemic and economic uncertainty. As of September 30, 2020, there was $115 million remaining under previously authorized repurchase programs. The company indicated it does not expect to resume buybacks until the economic environment stabilizes.

Chipotle works closely with suppliers using various pricing protocols to mitigate commodity price risks. While they have not experienced significant supply chain disruptions to date due to COVID-19, they acknowledge the potential for future disruptions. They also noted that elevated beef prices and fewer sales of high-margin beverages negatively impacted costs, partially offset by lower avocado costs and menu price increases.