After the closing bell Tuesday, quick-service restaurants (QSRs) Chipotle Mexican Grill (CMG) and Yum! Brands (YUM) reported earnings, with differing immediate results in after-market trading. Chipotle beat earnings estimates by 6 percent as it posted $3.88 per share on $1,09 billion in sales, which was slightly below expectations. Yum! announced an 11 percent beat at 80 cents per share on $2.62 billion in quarterly revenues, also a slight miss.
The biggest difference between the two companies is what happened when the after-market acted on the results: Chipotle sank 6 percent initially (buoying back toward -3 percent recently), largely on same-store sales comps that missed estimates of 11.5 percent by over a full percentage point. Food costs were better than expected at 33.9 percent (35 percent was estimated) and the company cited average sales volume of $25 billion per restaurant — a new record. But with CMG share price trading at well over 1500 percent from a decade ago, lowering comps are not what investors want to see.
Yum, on the other hand, is trading up close to 5 percent in late market trading, probably reflecting its comps in China not being as bad as expected at -12 percent. The company also reiterated that it expects a stronger China in the second half of 2015. Taco Bell comps were up 6 percent in the quarter — based on improved breakfast business — while comps were up 5 percent for KFC. Pizza Hut was flat.
Both companies on their respective conference calls — Chipotle's upcoming this afternoon and Yum's tomorrow morning — will need to address concerns to their business such as the negative impact of avian flu. Chipotle is also expected to take a charge of $2 million related for its ethically raised pork initiative. Also, Yum's Taco Bell is re-entering Japan for the first time in many a year.
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