Chipotle Mexican Grill (CMG)

Yesterday, we published a note detailing Starbucks’ menu-price increases at 20 of its stores in California. That note is available at:

After today’s (Tuesday’s) market close, Chipotle Mexican Grill reported Q4 2023 adjusted EPS of $10.36, ahead of our $9.49 forecast and sell-side consensus (according to Consensus Metrix) of $9.71. We attribute the earnings beat to leverage gained from better-than-expected same-store sales growth. Management indicates that at least part of the same-store sales robustness was achieved due to better throughput during key dayparts.

We believe that January has proven a tough month as regards same-store sales for a wide swath of the restaurant industry, including the fast-casual sector. Based on our conversations with industry contacts, bad weather – lapping a mild winter from one year ago – clearly seems to be the #1 reason behind the challenged January sales trends. As of today, it’s possible that February could prove to be similarly challenged.

After today’s (Thursday’s) market close, Chipotle Mexican Grill reported adjusted Q3 EPS of $11.36, coming in well ahead of our $10.50 forecast and sell-side consensus (according to Consensus Metrix) of $10.54.

On its July 26th conference call, Chipotle Mexican Grill management commented that “As Chicken al Pastor wraps up in late August, we have a planned new menu item for later in the quarter.” Let us examine what we believe this new menu item will be.

After today’s (Wednesday’s) market close, Chipotle Mexican Grill reported adjusted second-quarter EPS of $12.65, surpassing our $11.85 forecast and sell-side consensus (according to Consensus Metrix) of $12.27.

After today’s (Tuesday’s) market close, Chipotle Mexican Grill reported Q1 EPS of $10.50, coming in well above our $8.95 estimate, as well as sell-side consensus (according to Consensus Metrix) that had moved up to $8.95 in recent days.

We look for Chipotle Mexican Grill to release its first-quarter earnings after the market close on Tuesday, April 25th. For more information, please click on:

The most recent 10-K for Starbucks (SBUX; Buy, $102.50) lists, as a deferred tax asset, about $1,662.6 million for “Stored value card liability and deferred revenue.” In other words, Starbucks has sold nearly $1.7 billion worth of Starbucks Cards for which the dollar value stored on those cards has not been redeemed. This is effectively an interest-free loan from those who have not used those funds yet, to Starbucks. A nice piece of business, indeed.

Chipotle Mexican Grill appears to be starting up a new restaurant concept, with the first location to be a part of the Kitchen United Mix food hall located on the popular Third Street Promenade in Santa Monica, California.

After today’s (Tuesday’s) market close, Chipotle Mexican Grill reported adjusted Q4 EPS of $8.29, falling short of our $9.09 projection and sell-side consensus (according to Consensus Metrix) of $8.91. We’d note that Q4 Labor Costs/Revenues, at 25.6%, was higher than our 24.5% forecast. On today’s conference call, management noted that there was a lower-than-expected benefit from Q4’s Garlic Guajillo Steak limited-time offering. Management adds that it anticipated Q4 restaurant-level margins would be in the 25% range, as opposed to the 24.0% actual.

Back in September 2014, we published a note (for a former employer) entitled “CMG: A $1,300+ Stock by Decade’s End?” At the time, CMG shares traded at about $671 per share. As it turns out, despite highly challenging food-safety issues that led to five straight quarters of negative same-store sales over Q4 2015-Q4 2016, CMG stock ended 2020 at $1,480 per share – meaningfully above $1,300. What might a similar analysis today suggest about where CMG shares might end up in about five years’ time, at year-end 2027?

After today’s (Tuesday’s) market close, Chipotle Mexican Grill reported adjusted Q3 EPS of $9.51, ahead of our $9.20 forecast as well as sell-side consensus (according to Consensus Metrix) of $9.19. We attribute the earnings beat primarily to a more favorable-than-forecasted adjusted tax rate (23.4% actual vs. 26.0% projected). By our calculations, if the Q3 adjusted tax rate had been 26.0% (which was also consensus heading into today), then Q3 adjusted EPS would have been $9.18.

Chipotle Mexican Grill plans to announce its Q3 earnings after the market close on Tuesday, October 25th. For more info, click on:

After today’s (Tuesday’s) market close, Chipotle Mexican Grill reported Q2 adjusted EPS of $9.30. This came in above our $8.90 forecast and ahead of sell-side consensus (according to Consensus Metrix) of $9.04.

In late June, employees of a Chipotle Mexican Grill restaurant in Augusta, Maine became the first to officially seek to unionize. On June 22nd, the Kennebec Journal (of Maine) reported that “Workers at the Augusta Chipotle Mexican Grill are forming a union that could make it the first such unionized restaurant in the nation if the effort succeeds. A majority of workers at the restaurant located at the Marketplace at Augusta signed union cards expressing their intent to join a to-be-formed new union, Chipotle United, according to Brandi McNease, one of the crew members at the restaurant and leader of efforts to unionize her fellow workers.” For more info:

Employees of a Chipotle Mexican Grill restaurant in Augusta, Maine are apparently the first to officially seek to unionize. The Kennebec Journal (of Maine) reports that “Workers at the Augusta Chipotle Mexican Grill are forming a union that could make it the first such unionized restaurant in the nation if the effort succeeds. A majority of workers at the restaurant located at the Marketplace at Augusta signed union cards expressing their intent to join a to-be-formed new union, Chipotle United, according to Brandi McNease, one of the crew members at the restaurant and leader of efforts to unionize her fellow workers. A letter was signed by several employees who in a show of solidarity were on hand to deliver it together to an onsite manager Wednesday morning, a copy of which was also sent to Chipotle’s corporate offices. It states that a majority of the Augusta location’s crew ‘wish to be represented by Chipotle United for the purposes of collective bargaining.’” For more info:

After today’s market close, Chipotle reported adjusted Q1E EPS of $5.70. This was slightly below our $5.75 estimate, but slightly above sell-side consensus (according to Consensus Metrix) of $5.66. However, the adjusted Q1 tax rate came to 16.7%. This was meaningfully more favorable than our 25.0% forecast and consensus of 25.0%. We calculate that this difference between the actual adjusted tax rate and our 25.0% forecast helped Q1 EPS by about +59 cents.

Shares of CMG are down by -10.7% year-to-date, modestly underperforming the S&P 500’s -7.3% decline. Since we initiated coverage of Chipotle Mexican Grill on November 15, 2021, CMG shares have declined by -15.1%, versus the S&P 500’s -5.6% decrease. This provides some context for the following fundamental items that, in our view, have improved since mid-November:

After today’s (Tuesday’s) market close, Chipotle Mexican Grill reported adjusted Q4 EPS of $5.58, coming in above our $5.25 forecast and sell-side consensus (according to Consensus Metrix) of $5.25.

Chipotle Mexican Grill plans to release its Q4 2021 earnings after the market close on Tuesday, February 8th. How do CMG shares tend to trade heading into earnings, and the day after an earnings release?

Amongst the positives and opportunities for Chipotle Mexican Grill (CMG) are its great-tasting food that is responsibly sourced, (2) its speedy service, (3) Chipotle’s status as the largest concept in the fastest-growing major segment (fast-casual) of the U.S. restaurant industry, (4) the company’s growing use of “Chipotlanes,” units with drive-thrus that feature a Chipotle take on that method of service, (5) Chipotle’s digital capabilities, which are amongst the very best in the restaurant industry (and which also include over 24.5 million loyalty-program users as of the end of Q3), (6) the pace of menu innovation, which is quicker than it usually has been in Chipotle’s history, (7) Chipotle’s status as a highly-desirable tenant for prime real-estate locations, (8) Chipotle’s high (and growing) degree of cultural relevancy, and (9) Chipotle’s “Real Foodprint” sustainability impact tracker, which resonates in particular with younger folks.