Chipotle Beats 1Q Earnings, Revenues Up - Analyst Blog
April 19 2013 - 7:30AM
Zacks
Quick-casual restaurant chain,
Chipotle Mexican Grill Inc.’s (CMG) first-quarter
2013 earnings of $2.45 per share beat the Zacks Consensus Estimate
of $2.14 per share by 14.5%. The earnings grew almost 24.4% from
the prior-year quarter, driven by higher revenues, lower taxes and
share count.
In the quarter, revenues grew 13.4%
year over year to $726.8 million. The increase can be attributed to
new restaurant openings. The top-line results also surpassed the
Zacks Consensus Estimate of $725 million.
Behind the Headline
Numbers
Owing to the adverse effect of two
less working days in the quarter, comps grew only 1.0% compared
with 12.7% in the year-ago quarter. Chipotle traded two fewer days
in the first quarter of 2013 compared with last year since the
store was closed on Easter and there was no leap day. Excluding the
effect of these two days, comps would have grown 3%, which was
still lower than the year ago, figure due to higher menu prices, a
sluggish economy and a difficult consumer-spending environment.
Menu prices expanded 70 basis points (bps) during the year while
average check grew 30 bps.
The restaurant level operating
margin declined 110 bps annually to 26.3%, owing to the rise in
food as well as occupancy costs. Food costs as a percentage of
revenue increased 80 bps to 33.0% with the rise in prices for
cheese, chicken and salsa. Occupancy costs and other operating
costs as a percentage of revenue expanded 30 bps to 6.6%.
Total operating margin expanded 50
bps to 16.5% in the quarter despite the decline in restaurant
margins. Operating margins gained from improved operating expense
leverage and lower general and administrative (G&A)
expenses.
Stores Update
During the first quarter, Chipotle
launched 48 new units. As of Mar 30, 2013, the company operated
1,458 restaurants.
Liquidity
Chipotle ended the quarter with
cash and cash equivalents of $346.9 million versus $322.6 million
in the previous quarter. Total shareholders’ equity was in line
with the prior quarter at $1.3 billion.
Share
Repurchase
In the first quarter, the company
bought back 164,000 shares worth $51 million. During February, the
company announced the addition of $100 million to the existing
share repurchase program.
Guidance
The company has reiterated its
guidance for 2013. Management expects comps to grow in the low
single-digit level (rise in menu price excluded) mainly due to
uncertain economic environment. Effective tax rate will be nearly
38.5%. Further, the company remains on track to open nearly 165–180
new restaurants in 2013.
Our Take
Although Chipotle’s earnings and
revenues grew year over year, lowered comps growth in the past two
quarters remains a major concern. Moreover, higher input costs,
difficult consumer-spending environment and lower comps projection
for 2013 is also concerning. However, its strong brand name and
various initiatives to drive sales could provide some offset to all
the negative factors.
Chipotle currently carries a Zacks
Rank #3 (Hold). Other restaurateurs which are performing well
include Red Robin Gourmet Burgers Inc. (RRGB),
Cracker Barrel Old Country Store Inc. (CBRL), both
carrying a Zacks Rank #1 (Strong Buy), and Burger King
Worldwide Inc. (BKW) carrying a Zacks Rank #2 (Buy).
BURGER KING WWD (BKW): Free Stock Analysis Report
CRACKER BARREL (CBRL): Free Stock Analysis Report
CHIPOTLE MEXICN (CMG): Free Stock Analysis Report
RED ROBIN GOURM (RRGB): Free Stock Analysis Report
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