Summary
Chipotle Mexican Grill Inc. (CMG) filed an 8-K on March 15, 2016, providing an update on its first quarter 2016 financial and operating results. The company reported a partial recovery in sales volumes and comparable restaurant sales since its last update in early February. This recovery appears to be linked to an aggressive marketing campaign, including a free burrito offer, launched on February 8, 2016. Despite the sales recovery, the company anticipates a diluted loss per share for the first quarter, projecting it to be around ($1.00) or worse. This is attributed to significant increases in operating costs, including higher marketing and promotional spend, increased food costs due to new safety protocols and lower volumes, higher labor costs to support customer redemptions, and estimated legal expenses related to ongoing investigations. Chipotle also announced the hiring of a new Executive Director of Food Safety, Dr. James Marsden, signaling a continued focus on bolstering its food safety initiatives.
Key Highlights
- 1Comparable restaurant sales showed sequential improvement from February 8, 2016, through early March, though a slight decline occurred in the second week of March.
- 2February comparable restaurant sales improved to a decline of (26.1%) from (36.4%) in January.
- 3The company expects a diluted loss per share for the first quarter of 2016, estimated at ($1.00) or worse.
- 4Restaurant-level operating margin for Q1 2016 is anticipated to be in the mid-single digit range.
- 5Increased expenses are driven by higher marketing/promotions, food safety protocols, food waste, DNA testing, lower volumes, and labor costs.
- 6Chipotle has hired Dr. James Marsden as Executive Director of Food Safety to enhance food safety efforts.
- 7Ongoing investigations and increased legal expenses are expected to impact Q1 results.