10-QPeriod: Q1 FY2022

CHIPOTLE MEXICAN GRILL INC Quarterly Report for Q1 Ended Mar 31, 2022

Filed April 28, 2022For Securities:CMG

Summary

Chipotle Mexican Grill (CMG) reported strong performance in its first quarter of 2022, with total revenue increasing 16.0% to $2.0 billion year-over-year. This growth was primarily driven by a 9.0% increase in comparable restaurant sales, fueled by menu price adjustments and a rebound in in-restaurant dining, which grew 33.1% as COVID-19 restrictions eased. Digital sales, while a smaller percentage of overall revenue compared to the prior year, remained resilient, representing 41.9% of food and beverage revenue. Despite increased costs related to labor and food inflation, which pushed restaurant operating costs to 79.3% of revenue, the company saw a significant improvement in diluted earnings per share, which rose 25.6% to $5.59. This was partly due to a lower effective income tax rate and a decrease in general and administrative expenses, notably from lower stock-based compensation costs compared to the prior year. The company also continued its strategic expansion, opening 51 new restaurants, with a strong emphasis on the Chipotlane format. Financially, Chipotle maintained a robust liquidity position with $1.2 billion in cash and marketable investments as of March 31, 2022. The company actively engaged in share repurchases, utilizing $349.5 million in financing activities primarily for stock buybacks and tax withholdings related to stock compensation. Management expressed confidence in generating positive cash flow and achieving long-term growth, reiterating its goal to more than double the number of restaurants in North America.

Financial Highlights

46 data points
Beta

Revenue

$2.02B

Net Income

$158.29M

7.8% Net Margin

EPS (Diluted)

$0.11

Total Assets

$6.47B

Cash & Equivalents

$615.86M

Free Cash Flow

$186.74M

Financial Statements
Beta
Revenue$2.02B
Operating Expenses$1.83B
Operating Income$190.22M
Net Income$158.29M
EPS (Basic)$0.11
EPS (Diluted)$0.11
Shares Outstanding (Basic)1.40B
Shares Outstanding (Diluted)1.42B

Key Highlights

  • 1Total revenue increased 16.0% to $2.0 billion in Q1 2022 compared to Q1 2021.
  • 2Comparable restaurant sales grew 9.0% year-over-year, driven by menu price increases and higher in-restaurant traffic.
  • 3In-restaurant sales surged 33.1% due to the easing of COVID-19 restrictions.
  • 4Diluted earnings per share increased 25.6% to $5.59, benefiting from higher sales, pricing, and a lower effective tax rate.
  • 5Restaurant operating costs as a percentage of revenue increased to 79.3% due to higher labor and food costs.
  • 651 new restaurants were opened, with 42 featuring the popular Chipotlane format.
  • 7The company returned $349.5 million to shareholders through share repurchases and tax withholding payments.

Frequently Asked Questions

Chipotle's revenue growth of 16.0% to $2.0 billion was primarily driven by a 9.0% increase in comparable restaurant sales. This was fueled by a combination of menu price increases and a significant rebound in in-restaurant dining, which saw a 33.1% increase as COVID-19 restrictions were relaxed.

Restaurant operating costs, including food, beverage, packaging, and labor, increased as a percentage of revenue to 79.3% in Q1 2022, up from 77.7% in Q1 2021. This was primarily due to inflationary pressures on food costs and higher labor expenses from wage increases. Despite these cost pressures, diluted EPS increased by 25.6% to $5.59, benefiting from higher sales volume, pricing strategies, and a lower effective income tax rate.

Chipotle continues to focus on new restaurant development, opening 51 new locations in Q1 2022, with a significant portion (42) featuring the Chipotlane drive-thru concept. Management remains confident in the long-term opportunity to more than double the number of Chipotle restaurants in North America. The company also plans to utilize operating cash flow for ongoing investment in new restaurants, share repurchases, and existing restaurant maintenance.

Chipotle maintained a strong liquidity position, with $1.2 billion in cash and marketable investments as of March 31, 2022. The company generated $282.9 million in cash from operating activities and used $349.5 million in financing activities, primarily for share repurchases and tax withholdings related to stock compensation. They also have an undrawn borrowing capacity of $500 million under their credit facility, indicating ample financial flexibility.