How strong was Chipotle's sales growth in Q1 2024?

Comparable restaurant sales rose 7.0%, driven by a 5.4% increase in transactions and a 1.6% increase in average check. Total revenue grew 14.1% to $2.7 billion, reflecting both comps and new unit growth.

Did profitability improve, and what drove it?

Yes. Operating margin rose to 16.3% from 15.5%, and restaurant-level operating margin increased 190 basis points to 27.5%. The gains came mainly from sales leverage and lower food costs from menu price increases, partially offset by wage and ingredient inflation, especially beef and produce.

What was the impact of the legal reserve increase?

The company recorded a $13.3 million increase in legal reserves for estimated settlements of distinct legal matters, reducing diluted EPS by $0.36 after tax. Adjusted diluted EPS excluding this charge was $13.37, compared with GAAP EPS of $13.01.

What is the company's outlook for 2024?

Management expects full-year comparable restaurant sales growth in the mid-to-high single-digit range, 285 to 315 new restaurant openings (over 80% with Chipotlanes), and an underlying effective tax rate of 25% to 27% before discrete items.

How does the stock split affect share repurchases and shareholder returns?

The announced 50-for-1 stock split limited buybacks during most of Q1, with only $25.0 million repurchased at an average price of $2,320 per share. Chipotle plans to resume repurchases when the trading window opens on April 26, 2024, and $399.1 million remained under existing authorizations as of March 31, 2024.

CMG 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed April 24, 2024. Cited figures are marked; the original filing is the authoritative source.

Chipotle Mexican Grill (NYSE: CMG) reported first quarter 2024 results on April 24, 2024, with growth driven by traffic and margin expansion.

Total revenue rose 14.1% year over year to $2.7 billion^a, and comparable restaurant sales increased 7.0%, with transactions up 5.4% and average check up 1.6%. Operating margin expanded to 16.3% from 15.5%, and restaurant-level operating margin improved 190 basis points to 27.5%, reflecting sales leverage that more than offset wage and ingredient inflation. GAAP diluted EPS was $13.01 (up 23.9%), and adjusted diluted EPS was $13.37 (up 27.3%) after excluding a $13.3 million legal reserve increase.

Unit growth remained strong, with 47 restaurants opened in the quarter (43 with Chipotlanes), bringing the total to 3,479 restaurants at quarter-end. Management reaffirmed 2024 guidance for mid-to-high single-digit comparable sales growth, 285 to 315 new openings (over 80% with Chipotlanes), and an underlying effective tax rate of 25% to 27%. Cash and investments grew meaningfully, and operating cash flow was $569 million^b versus $455 million a year earlier.

Capital returns were light in the quarter because of a blackout tied to the announced 50-for-1 stock split, with $25.0 million^c repurchased and $399.1 million remaining under authorizations. The key watch items for investors are whether comparable sales momentum holds through the rest of 2024 against a tougher comparison base, whether wage and beef cost inflation pressures restaurant margins as the company scales, and the ongoing legal reserve charges. The stock split and the planned resumption of buybacks after April 26 are also near-term catalysts.

02—Key points

Key Highlights

Total revenue increased 14.1% to $2.7 billion, driven by 7.0% comparable restaurant sales growth (5.4% transactions, 1.6% average check) and new restaurant openings.
Restaurant-level operating margin expanded 190 basis points to 27.5% from 25.6%, primarily from sales leverage, partially offset by wage and ingredient inflation.
Diluted EPS rose 23.9% to $13.01; adjusted diluted EPS was $13.37 (up 27.3%) excluding a $0.36 after-tax legal reserve charge.
Operating margin improved to 16.3% from 15.5%, and food, beverage and packaging costs fell to 28.8% of revenue from 29.2%.
Opened 47 restaurants (43 with Chipotlanes), ending the quarter at 3,479 locations; digital sales reached 36.5% of food and beverage revenue.
2024 guidance reaffirmed: mid-to-high single-digit comparable sales growth, 285-315 new openings, and a 25%-27% underlying tax rate.
Announced a 50-for-1 stock split; repurchased only $25.0 million of stock in Q1 due to the blackout, with plans to resume buybacks after April 26, 2024, and $399.1 million remaining under authorizations.

03—Questions

Frequently Asked Questions

How strong was Chipotle's sales growth in Q1 2024?
Comparable restaurant sales rose 7.0%, driven by a 5.4% increase in transactions and a 1.6% increase in average check. Total revenue grew 14.1% to $2.7 billion, reflecting both comps and new unit growth.
Did profitability improve, and what drove it?
Yes. Operating margin rose to 16.3% from 15.5%, and restaurant-level operating margin increased 190 basis points to 27.5%. The gains came mainly from sales leverage and lower food costs from menu price increases, partially offset by wage and ingredient inflation, especially beef and produce.
What was the impact of the legal reserve increase?
The company recorded a $13.3 million increase in legal reserves for estimated settlements of distinct legal matters, reducing diluted EPS by $0.36 after tax. Adjusted diluted EPS excluding this charge was $13.37, compared with GAAP EPS of $13.01.
What is the company's outlook for 2024?
Management expects full-year comparable restaurant sales growth in the mid-to-high single-digit range, 285 to 315 new restaurant openings (over 80% with Chipotlanes), and an underlying effective tax rate of 25% to 27% before discrete items.
How does the stock split affect share repurchases and shareholder returns?
The announced 50-for-1 stock split limited buybacks during most of Q1, with only $25.0 million repurchased at an average price of $2,320 per share. Chipotle plans to resume repurchases when the trading window opens on April 26, 2024, and $399.1 million remained under existing authorizations as of March 31, 2024.

04—Continue

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