Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported
financial results for its third quarter ended September 30,
2017.
Overview for the three months ended September 30, 2017 as
compared to the three months ended September 30, 2016:
- Revenue increased 8.8% to $1.13
billion
- Comparable restaurant sales increased
1.0%
- Restaurant level operating margin
increased to 16.1% from 14.1%
- Net income was $19.6 million, including
the after-tax impact of an $18.2 million estimated liability
related to the data security incident announced in April 2017, an
increase from $7.8 million
- Diluted earnings per share was $0.69,
net of a $0.64 impact from estimated charges recorded related to
the data security incident and approximately $0.13 of impacts from
Hurricanes Harvey and Irma, an increase from $0.27
- Opened 38 new restaurants, and closed
or relocated 3 restaurants
Overview for the nine months ended September 30, 2017 as
compared to the nine months ended September 30, 2016:
- Revenue increased 17.3% to $3.37
billion
- Comparable restaurant sales increased
8.3%
- Restaurant level operating margin was
17.6%, an increase from 12.5%
- Net income was $132.5 million,
including the after-tax impact of an $18.2 million estimated charge
related to the data security incident announced in April 2017, an
increase from $7.0 million
- Diluted earnings per share was $4.62,
net of a $0.64 impact from estimated charges recorded related to
the data security incident and approximately $0.13 of impacts from
Hurricanes Harvey and Irma, an increase from $0.23
- Opened 145 new restaurants and closed
or relocated 21 restaurants, including the closure of 15 ShopHouse
locations
“We continued to make important progress to improve the guest
experience at our restaurants during the quarter,” said Steve Ells,
founder, Chairman and CEO of Chipotle. “Our strategic initiatives
in operations, innovating our digital sales platform, new menu
introductions, and marketing the brand are starting to take hold.
Despite several unusual impacts during the quarter, including the
impact of hurricanes, we maintained our focus and saw some
encouraging signs. Our leadership remains focused on setting the
foundation for future growth, and we are confident in our teams’
ability to deliver against those plans.”
Results for the three months ended September 30, 2017
Revenue for the quarter was $1.13 billion, up 8.8% from the
third quarter of 2016. The increase in revenue was driven by new
restaurant openings and to a lesser extent from an increase in
comparable restaurant sales, including a 1.1% benefit from
comparing against 2016 revenue, which was lower because of the
revenue deferral for outstanding rewards under our limited-time
Chiptopia Summer Rewards program. We opened 38 new restaurants
during the quarter, closed two restaurants, and relocated one
restaurant, bringing the total restaurant count to 2,374.
Food costs were 35.0% of revenue, a decrease of 10 basis points
as compared to the third quarter of 2016. The benefit of the menu
price increases taken in select restaurants during the second
quarter of 2017 and decreased paper cost and usage were offset by
higher avocado and beef prices, as well as steak making up a higher
portion of our product mix compared to the third quarter of
2016.
Restaurant level operating margin was 16.1% in the third quarter
of 2017, an improvement from 14.1% in the third quarter of 2016.
The improvement was driven primarily by decreased marketing and
promotion expense and labor efficiencies.
General and administrative expenses were 8.8% of revenue for the
third quarter of 2017, an increase of 120 basis points over the
third quarter of 2016 primarily due to recording a liability of
$30.0 million ($18.2 million after tax and $0.64 on basic and
diluted earnings per share) during the third quarter of 2017, which
represents an estimate of potential claims and assessments by
payment card networks related to the data security incident that
was announced in April 2017. This increase was partially offset by
a decrease in meeting costs because of the biennial All Managers
Conference that was held in September 2016.
Net income for the third quarter of 2017 was $19.6 million, or
$0.69 per diluted share, compared to net income of $7.8 million, or
$0.27 per diluted share in the third quarter of 2016.
Results for the nine months ended September 30, 2017
Revenue for the first nine months of 2017 was $3.37 billion, up
17.3% from the first nine months of 2016. The increase in revenue
was driven by new restaurant openings and an 8.3% increase in
comparable restaurant sales, including a 0.6% benefit from deferral
of revenue from 2016 (which partially benefitted the first quarter
of 2017) for outstanding rewards under the Chiptopia Summer Rewards
program. Comparable restaurant sales improved primarily due to an
increase in the number of paid transactions and an increase in
average check due to fewer promotions during the first nine months
of 2017. We opened 145 new restaurants during the first nine months
of 2017, and closed or relocated 21 restaurants, including the
closure of 15 ShopHouse restaurants, bringing the total restaurant
count to 2,374.
Food costs were 34.3% of revenue, a decrease of 50 basis points
as compared to the first nine months of 2016. Cost savings from
bringing the preparation of lettuce and bell peppers back into our
restaurants after using pre-cut produce during portions of 2016,
reduced testing and waste costs, and the benefit of the menu price
increase that went into effect in select restaurants during the
second quarter of 2017 were partially offset by higher avocado
prices.
Restaurant level operating margin was 17.6% for the nine months
ended September 30, 2017, an improvement from 12.5% in the first
nine months of 2016. The improvement was driven by decreased
marketing and promotional expense, sales leverage, and labor
efficiencies. Marketing and promotional expenses were 3.4% of
revenue during the first nine months of 2017, compared to 5.2% of
revenue during the first nine months of 2016.
General and administrative expenses were 7.1% of revenue for the
first nine months of 2017, a decrease of 30 basis points compared
to the first nine months of 2016, primarily due to sales leverage.
General and administrative expense increased in dollar terms for
the nine months ended September 30, 2017, primarily due to
recording the $30.0 million liability estimate related to the data
security incident, as well as increased non-cash stock based
compensation expense and increased bonus expense. The increase was
partially offset by lower meeting costs because of holding the
biennial All Managers Conference in September 2016 and lower legal
costs. Stock compensation expense was higher during the first nine
months of 2017 because the first nine months of 2016 included a
reduction in expense for performance share awards that were no
longer expected to vest against performance criteria.
Net income for the first nine months of 2017 was $132.5 million,
or $4.62 per diluted share, compared to net income of $7.0 million,
or $0.23 per diluted share, for the nine months ended September 30,
2016.
Outlook
For the full year 2017, management expects:
- Comparable restaurant sales increases
of about 6.5%
- New restaurant openings slightly below
the low end of the previously-disclosed range of 195 to 210
- An estimated effective full year tax
rate of approximately 39.1%
For 2018, management expects:
- 130 to 150 new restaurant openings
- An estimated effective full year tax
rate of approximately 39.0%
Definitions
The following definitions apply to these terms as used
throughout this release:
Comparable restaurant sales, or sales comps, represent
the change in period-over-period sales for restaurants in operation
for at least 13 full calendar months.
Restaurant level operating margin represents total
revenue less restaurant operating costs, expressed as a percent of
total revenue.
Conference Call
Chipotle will host a conference call to discuss its third
quarter 2017 financial results on Tuesday, October 24, 2017, at
4:30 PM Eastern time.
The conference call can be accessed live over the phone by
dialing 1-877-451-6152 or for international callers by dialing
1-201-389-0879. The call will be webcast live from the company's
website at chipotle.com under the investor relations section. An
archived webcast will be available approximately one hour after the
end of the call.
About Chipotle
Steve Ells, Founder, Chairman and CEO, started Chipotle with the
idea that food served fast did not have to be a typical fast food
experience. Today, Chipotle continues to offer a focused menu of
burritos, tacos, burrito bowls, and salads made from fresh,
high-quality raw ingredients, prepared using classic cooking
methods and served in an interactive style allowing people to get
exactly what they want. Chipotle seeks out extraordinary
ingredients that are not only fresh, but that are raised
responsibly, with respect for the animals, land, and people who
produce them. Chipotle prepares its food using real, whole
ingredients, and is the only national restaurant brand that
prepares its food using no added colors, flavors or other
industrial additives typically found in fast food. Chipotle opened
with a single restaurant in Denver in 1993 and now operates more
than 2,300 restaurants. For more information, visit
chipotle.com.
Forward-Looking Statements
Certain statements in this press release, including statements
under the heading “Outlook” of our expected comparable restaurant
sales increases, number of new restaurant openings, and effective
tax rate for 2017, and our expected number of new restaurant
openings and effective tax rate for 2018, are forward-looking
statements as defined in the Private Securities Litigation Reform
Act of 1995. We use words such as “anticipate”, “believe”, “could”,
“continue”, “should”, “estimate”, “expect”, “intend”, “may”,
“predict”, “project”, “target”, and similar terms and phrases,
including references to assumptions, to identify forward-looking
statements. The forward-looking statements in this press release
are based on information available to us as of the date any such
statements are made and we assume no obligation to update these
forward-looking statements. These statements are subject to risks
and uncertainties that could cause actual results to differ
materially from those described in the statements. These risks and
uncertainties include, but are not limited to, the following: the
uncertainty of our ability to achieve expected levels of comparable
restaurant sales due to factors such as changes in consumers’
perceptions of our brand, including as a result of food-borne
illness incidents, the impact of competition, including from
sources outside the restaurant industry, decreased overall consumer
spending, or our possible inability to increase menu prices or
realize the benefits of menu price increases; the risk of
food-borne illnesses and other health concerns about our food or
dining out generally; factors that could affect our ability to
achieve and manage our planned expansion, such as the availability
of a sufficient number of suitable new restaurant sites and the
availability of qualified employees; the performance of new
restaurants and their impact on existing restaurant sales;
increases in the cost of food ingredients and other key supplies or
higher food costs due to changes in supply chain protocols; the
potential for increased labor costs or difficulty retaining
qualified employees, including as a result of market pressures,
enhanced food safety procedures in our restaurants, or new
regulatory requirements; risks related to our marketing and
advertising strategies, which may not be successful and may expose
us to liabilities; security risks associated with the acceptance of
electronic payment cards or electronic storage and processing of
confidential customer or employee information; risks relating to
litigation, including possible governmental actions related to
food-borne illness incidents, as well as class action litigation
regarding employment laws, a recent data security incident,
advertising claims or other matters; the impact of federal, state
or local government regulations relating to our employees, our
restaurant design, or the sale of food or alcoholic beverages;
risks relating to our expansion into new markets; risks associated
with our Food With Integrity philosophy, including supply shortages
and potential liabilities from advertising claims and other
marketing activities related to Food With Integrity; risks relating
to our insurance coverage and self-insurance; our dependence on key
personnel and uncertainties arising from recent changes in our
leadership; risks regarding our ability to protect our brand and
reputation; risks associated with our ability to effectively manage
our growth; and other risk factors described from time to time in
our SEC reports, including our most recent annual report on Form
10-K and subsequent quarterly reports on Form 10-Q, all of which
are available on the investor relations page of our website at
ir.chipotle.com.
Chipotle Mexican Grill,
Inc.Condensed Consolidated Statement of Income(in
thousands, except per share data)(unaudited)
Three months ended September 30, 2017
2016 Revenue $ 1,128,074 100.0 % $ 1,036,982
100.0 %
Restaurant operating costs (exclusive of
depreciation and amortization shown separately below):
Food, beverage and packaging 394,567 35.0 363,900 35.1 Labor
306,862 27.2 286,144 27.6 Occupancy 83,199 7.4 74,201 7.2 Other
operating costs 162,312 14.4 166,045 16.0 General and
administrative expenses 99,182 8.8 78,405 7.6 Depreciation and
amortization 41,546 3.7 37,434 3.6 Pre-opening costs 2,792 0.2
4,490 0.4 Loss on disposal and impairment of assets 6,747
0.6 16,637 1.6 Total operating
expenses 1,097,207 97.3 1,027,256
99.1 Income from operations 30,867 2.7 9,726 0.9
Interest and other income, net 1,275 0.1
672 0.1 Income before income taxes 32,142 2.8
10,398 1.0 Provision for income taxes (12,532 ) (1.1 )
(2,599 ) (0.3 ) Net income $ 19,610 1.7 % $ 7,799
0.8 % Earnings per share: Basic $ 0.69 $ 0.27
Diluted $ 0.69 $ 0.27 Weighted average common shares
outstanding: Basic 28,415 29,063
Diluted 28,439 29,171
Chipotle Mexican Grill,
Inc.Condensed Consolidated Statement of Income(in
thousands, except per share data)(unaudited)
Nine months ended September 30,
2017 2016 Revenue $ 3,366,312 100.0 % $
2,869,824 100.0 % Restaurant operating costs (exclusive of
depreciation and amortization shown separately below): Food,
beverage and packaging 1,155,514 34.3 999,968 34.8 Labor 900,564
26.8 820,751 28.6 Occupancy 242,482 7.2 217,147 7.6 Other operating
costs 476,606 14.2 473,390 16.5 General and administrative expenses
238,698 7.1 211,171 7.4 Depreciation and amortization 121,906 3.6
108,296 3.8 Pre-opening costs 9,764 0.3 13,044 0.5 Loss on disposal
and impairment of assets 10,013 0.3
22,040 0.8 Total operating expenses 3,155,547
93.7 2,865,807 99.9 Income from
operations 210,765 6.3 4,017 0.1 Interest and other income, net
3,512 0.1 3,584 0.1
Income before income taxes 214,277 6.4 7,601 0.3 Provision for
income taxes (81,817 ) (2.4 ) (638 ) (0.0 ) Net
income $ 132,460 3.9 % $ 6,963 0.2 % Earnings per
share: Basic $ 4.63 $ 0.24 Diluted $ 4.62 $
0.23 Weighted average common shares outstanding: Basic
28,604 29,387 Diluted 28,696
29,792
Chipotle Mexican
Grill, Inc.Condensed Consolidated Balance
Sheet(in thousands, except per share data)
September 30, December 31,
2017 2016 (unaudited) Assets Current
assets: Cash and cash equivalents $ 113,480 $ 87,880 Accounts
receivable, net of allowance for doubtful accounts of $39 and $259
as of September 30, 2017 and December 31, 2016, respectively 23,870
40,451 Inventory 21,634 15,019 Prepaid expenses and other current
assets 49,089 44,080 Income tax receivable 12,986 5,108 Investments
434,877 329,836 Total current assets
655,936 522,374 Leasehold improvements, property and equipment, net
1,331,786 1,303,558 Long term investments - 125,055 Other assets
54,716 53,177 Goodwill 21,939 21,939
Total assets $ 2,064,377 $ 2,026,103
Liabilities
and shareholders' equity Current liabilities: Accounts payable
$ 86,705 $ 78,363 Accrued payroll and benefits 108,120 76,301
Accrued liabilities 128,577 127,129
Total current liabilities 323,402 281,793 Deferred rent 309,446
288,927 Deferred income tax liability 7,577 18,944 Other
liabilities 36,826 33,946 Total
liabilities 677,251 623,610
Shareholders' equity: Preferred stock, $0.01 par value, 600,000
shares authorized, no shares issued as of September 30, 2017 and
December 31, 2016, respectively - - Common stock $0.01 par value,
230,000 shares authorized, and 35,851 and 35,833 shares issued as
of September 30, 2017 and December 31, 2016, respectively 359 358
Additional paid-in capital 1,294,315 1,238,875 Treasury stock, at
cost, 7,564 and 7,019 common shares at September 30, 2017 and
December 31, 2016, respectively (2,257,174 ) (2,049,389 )
Accumulated other comprehensive income (loss) (3,645 ) (8,162 )
Retained earnings 2,353,271 2,220,811
Total shareholders' equity 1,387,126 1,402,493
Total liabilities and shareholders' equity $ 2,064,377
$ 2,026,103
Chipotle Mexican
Grill, Inc.Condensed Consolidated Statement of Cash
Flows(unaudited)(in thousands)
Nine months endedSeptember
30,
2017 2016 Operating activities Net income $
132,460 $ 6,963 Adjustments to reconcile net income to net cash
provided by operating activities: Depreciation and amortization
121,906 108,296 Deferred income tax (benefit) provision (11,323 )
380 Loss on disposal and impairment of assets 10,013 22,040 Bad
debt allowance 181 99 Stock-based compensation expense 54,596
48,389 Excess tax benefit on stock-based compensation - (1,888 )
Other (126 ) (224 ) Changes in operating assets and liabilities:
Accounts receivable 16,477 16,084 Inventory (7,023 ) (3,442 )
Prepaid expenses and other current assets (4,890 ) (5,362 ) Other
assets (1,382 ) 1,509 Accounts payable 14,771 (11,938 ) Accrued
liabilities 35,514 36,245 Income tax payable/receivable (7,810 )
36,026 Deferred rent 22,410 27,319 Other long-term liabilities
3,060 576 Net cash provided by
operating activities 378,834 281,072
Investing activities Purchases of leasehold improvements,
property and equipment (165,506 ) (192,252 ) Purchases of
investments (120,084 ) - Maturities of investments 140,000 45,000
Proceeds from sale of investments - 540,648
Net cash provided by (used in) investing activities
(145,590 ) 393,396
Financing activities
Acquisition of treasury stock (209,585 ) (771,354 ) Excess tax
benefit on stock-based compensation - 1,888 Stock plan transactions
and other financing activities 10 23
Net cash used in financing activities (209,575 )
(769,443 ) Effect of exchange rate changes on cash and cash
equivalents 1,931 1,098 Net change in cash and cash equivalents
25,600 (93,877 ) Cash and cash equivalents at beginning of period
87,880 248,005 Cash and cash
equivalents at end of period $ 113,480 $ 154,128
Chipotle Mexican
Grill, Inc.Supplemental Financial and Other
Data(dollars in thousands)
For the three months ended
Sep. 30,
Jun. 30, Mar. 31, Dec.
31, Sep. 30, 2017 2017 2017
2016 2016 Number of restaurants opened 38 50 57 72 55
Restaurant relocations/closures (3 ) (2 ) (16 ) - (1 ) Number of
restaurants at end of period 2,374 2,339 2,291 2,250 2,178 Average
restaurant sales $ 1,948 $ 1,957 $ 1,931 $ 1,868 $ 1,914 Comparable
restaurant sales increase (decrease) 1.0 % 8.1 % 17.8 %
(4.8%
)
(21.9%
)
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171024006497/en/
Chipotle Mexican Grill, Inc.Mark Alexee,
303-605-1042malexee@chipotle.com
Chipotle Mexican Grill (NYSE:CMG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Chipotle Mexican Grill (NYSE:CMG)
Historical Stock Chart
From Apr 2023 to Apr 2024