8-KOther Events

CHIPOTLE MEXICAN GRILL INC 8-K Report, Corporate Update (Jun 19, 2017)

Filed June 19, 2017For Securities:CMG

Summary

Chipotle Mexican Grill, Inc. (CMG) filed an 8-K on June 19, 2017, to reaffirm and clarify financial and operating guidance for the second quarter and full year of 2017. The company is hosting an investor meeting and is using this filing to ensure consistent communication of its outlook. Key financial projections reiterated include expectations for Q2 2017 food costs to remain around 34.2% of sales, with marketing and promotion costs increasing by 20-30 basis points to 3.6%-3.7% of sales. For the full year 2017, Chipotle continues to project comparable restaurant sales growth in the high single digits, the opening of 195-210 new restaurants, and an effective tax rate of approximately 39.0%. The filing also includes forward-looking statements and a discussion of associated risks and uncertainties.

Key Highlights

  • 1Reaffirmation of Q2 2017 financial guidance.
  • 2Expected Q2 2017 food costs at approximately 34.2% of sales.
  • 3Anticipated Q2 2017 marketing and promotion costs to be 3.6%-3.7% of sales, an increase of 20-30 basis points from Q1 2017.
  • 4Reiteration of full-year 2017 comparable restaurant sales increase target in the high single digits.
  • 5Confirmation of full-year 2017 new restaurant opening target of 195-210 units.
  • 6Estimated full-year 2017 effective tax rate projected at approximately 39.0%.
  • 7Inclusion of forward-looking statements and detailed risk factors impacting future performance.

Frequently Asked Questions

The main purpose of this 8-K filing is to reaffirm and clarify Chipotle's financial and operating guidance for the second quarter and full year of 2017. This is being done in connection with an investor meeting to ensure consistent communication of the company's outlook.

For the second quarter of 2017, Chipotle is reaffirming its expectation that food costs will be approximately 34.2% of sales. Marketing and promotion costs are expected to be up 20 to 30 basis points from the first quarter, reaching 3.6%-3.7% of sales. Consequently, other operating costs as a percentage of sales are expected to be at or slightly higher than the first quarter.

For the full year 2017, Chipotle continues to expect comparable restaurant sales to increase in the high single digits. The company also maintains its projection for opening 195-210 new restaurants and anticipates an estimated effective tax rate of approximately 39.0%.

Chipotle highlights several risks that could materially affect its financial results. These include uncertainties in achieving comparable sales due to changes in consumer perception (especially post-foodborne illness incidents), competition, decreased consumer spending, and pricing strategies. Other risks involve foodborne illnesses and health concerns, challenges in expansion and employee availability, rising food and labor costs, marketing effectiveness, data security, regulatory changes, supply chain issues related to its 'Food With Integrity' philosophy, litigation, leadership changes, and brand reputation.