Chipotle Mexican Grill, Inc. (CMG) reported first quarter 2011 earnings of $1.46, which surpassed the Zacks Consensus Estimate of $1.43 and soared 22.7% from $1.19 in the prior-year quarter.
The company experienced strong top-line growth buoyed by higher traffic count and new restaurant openings.
The fast food restaurant chain said that revenues rose 24.3 % to $509.4 million, driven by new restaurant openings and an increase in comparable-store sales. The reported revenues also outperformed the Zacks Consensus Estimate of $495 million.
Quarter Highlights
Comparable-store sales growth has been decelerating since second-quarter 2008 – when it increased 7.1% – although it remained positive, showing resilience in a sluggish environment.
After reaching the lowest point of 1.7% in the second-quarter 2009, comps have been on the rise. Comparable-stores sales climbed 12.4% in the quarter under review and surged from 4.3% in the prior-year quarter.
Restaurant operating margin was down 90 basis points to 25.2%, attributable to a 180- basis point (bp) (as a percentage of total revenue) spike in food, beverage and packaging costs, and a 60-bp rise in other operating costs, partially offset by a 80- bp drop in labor and a 70-bp drop in occupancy.
Total operating margin plunged from 15.0% in the first quarter of 2010 to 14.7% in the current quarter, due to higher restaurant operating cost partially set off by a 10-bps dip in general and administrative expenses, a 50-bp drop in depreciation and amortization cost and a 10-bp decline in pre-opening cost.
Stores Update
During the quarter under review, Chipotle opened 12 restaurants. It currently operates 1,095 outlets.
Chipotle has remained largely unruffled by the recent economic slowdown. The company plans to open 135-145 new restaurants in fiscal 2011.
Financial Position
Chipotle ended the quarter with cash and cash equivalents of $282.9 million and shareholders’ equity of $862.7 million.
Outlook
For fiscal year 2011, management now expects mid single digit comparable-store sales growth, as compared to its previous expectation of low single digit growth.
Our Take
We believe Chipotle is well positioned to expand rapidly while generating improved earnings margins and returns on invested capital. With a strong balance sheet, consistent earnings, healthy cash flow, excellent unit economics, international expansion and continued marketing initiatives, we are of the opinion that the stock provides relative safety and consistent growth.
The company has reported better-than-expected results. Hence, we expect estimates to move up in the coming days. However, margins are expected to remain under pressure due to food cost inflation.
One of Chipotle’s primary competitors California Pizza Kitchen Inc. (CPKI) will report its first quarter 2011 results on May 6, 2011. Peers Cheesecake Factory Incorporated (CAKE) and Yum! Brands, Inc! (YUM) have already reported first quarter results.
Cheesecake's first quarter earnings per share of 34 cents surpassed the Zacks Consensus Estimate by a penny on comparable-store sales growth, but Yum! reported adjusted EPS of 63 cents, missing the Zacks Consensus Estimate by a penny.
CHEESECAKE FACT (CAKE): Free Stock Analysis Report
CHIPOTLE MEXICN (CMG): Free Stock Analysis Report
CALIF PIZZA KIT (CPKI): Free Stock Analysis Report
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