Chipotle Mexican Grill CL B (NYSE:CMG.B)
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Chipotle Mexican Grill, Inc. (NYSE: CMG and CMG.B) today reported
financial results for its first quarter ended March 31, 2008.
Highlights for the first quarter of 2008 as compared to the first
quarter of 2007 include:
Revenue increased 29.3% to $305.3 million
Comparable restaurant sales increased 10.2%
Restaurant level operating margins increased 50 basis points to 21.2%
Income from operations as a percentage of revenue increased 90 basis
points to 8.8%
Net income increased 38.9% to $17.3 million
Diluted earnings per share increased 36.8% to $0.52
“Our commitment to invest in better
ingredients, from more sustainable sources, has continued to allow us to
serve better tasting food as we pursue our vision to change the way the
world thinks about and eats fast food,” said
Chipotle Founder, Chairman and CEO Steve Ells. “Our
results for the quarter demonstrate that customers continue to be loyal
to Chipotle, and that we are able to attract new customers even in this
challenging economic environment.”
“By creating a culture that appeals only to
the highest performers, we are providing better service and a better
restaurant experience for our customers, while also creating greater
opportunities for the future leaders of our company,”
said Chipotle President and Chief Operating Officer Monty Moran. “In
turn, these improvements to our culture also contribute to the strength
of our unit economic model and our ability to create value for our
shareholders.”
First Quarter 2008 Results
Revenue for the first quarter of 2008 increased 29.3% to $305.3 million
from $236.1 million in the first quarter of 2007. This growth in revenue
was attributable to new restaurants not in the comparable base and a
10.2% increase in comparable restaurant sales in the first quarter.
Comparable restaurant sales growth was primarily due to an increase in
customer visits. Chipotle opened 28 restaurants in existing markets
during the first quarter of 2008.
Restaurant level operating margins increased to 21.2% in the first
quarter of 2008 from 20.7% in the first quarter of 2007, primarily due
to menu price increases associated with the addition of naturally raised
meats in certain markets and efficiencies in labor.
General and administrative expenses were $21.6 million in the first
quarter of 2008, or 7.1% of revenue, compared to $17.0 million in the
first quarter of 2007, or 7.2% of revenue. In the first quarter of 2008,
general and administrative expenses declined as a percentage of revenue
primarily due to the effect of economies of scale from higher restaurant
sales.
Income from operations increased to $26.8 million for the first quarter
of 2008, compared to $18.6 million in the first quarter of 2007.
The effective tax rate for the quarter was 38.4%, compared to 38.0% in
the first quarter of 2007. The first quarter 2008 effective tax rate
increased due to the decline in interest rates on tax exempt securities
from the first quarter of 2007 partially offset by a lower statutory
state tax rate.
Net income for the first quarter of 2008 was $17.3 million, or $0.52 per
diluted share, compared to $12.4 million, or $0.38 per diluted share in
the first quarter of 2007.
“Given the extremely challenging operating
environment, our double digit comparable restaurant sales increase
demonstrates the unique bond we have with our customers, and our
resulting margin expansion highlights the underlying strength of our
restaurant unit economics,” said Jack
Hartung, Chief Financial Officer. “We expect
to open more restaurants this year than ever before with 130 –
140 openings as well as growing diluted earnings per share, over the
long-term, at an average annual rate of at least 25% though we continue
to face significant challenges in the near term.”
Outlook
For the full year 2008, management expects the following:
Comparable restaurant sales increases in the mid single digit range
130 - 140 new restaurant openings
An annual effective tax rate of approximately 38.5%
Diluted weighted average common shares outstanding for the year of
approximately 33.6 million
Definitions
The following definitions apply to these terms as used throughout this
release:
Comparable restaurant sales increases include company-operated
restaurants only and represent the change in period-over-period sales
for the comparable restaurant base. A restaurant becomes comparable in
its 13th full calendar month of operation.
Average restaurant sales refers to the average trailing 12-month
sales for company-operated restaurants in operation for at least 12 full
calendar months.
Restaurant level operating margin represents total revenue less
restaurant operating costs, expressed as a percent of total revenue.
New markets are defined as markets opened within the calendar
year.
Conference Call
Chipotle will host a conference call to discuss first quarter financial
results today at 5:00 PM Eastern Time. Hosting the call will be Steve
Ells, Founder, Chairman and Chief Executive Officer, Monty Moran,
President and Chief Operating Officer, and Jack Hartung, Chief Financial
Officer.
The conference call can be accessed live over the phone by dialing
1-888-599-4877 or for international callers by dialing 1-913-312-1520. A
replay will be available one hour after the call and can be accessed by
dialing 1-888-203-1112 or 1-719-457-0820 for international callers; the
password is 2045751. The replay will be available until April 30, 2008.
The call will be webcast live from the Company's Web site at www.chipotle.com
under the investor relations section. An archived webcast will be
available approximately one hour after the end of the call.
About Chipotle
Chipotle Mexican Grill offers a focused menu of burritos, tacos, burrito
bowls (a burrito without the tortilla) and salads made from fresh,
high-quality raw ingredients, prepared using classic cooking methods and
served in a distinctive atmosphere. Through our vision of Food With
Integrity, Chipotle is seeking better food not only from using fresh
ingredients, but ingredients that are sustainably grown and naturally
raised with respect for the animals, the land, and the farmers who
produce the food. Chipotle opened its first restaurant in 1993 and
currently operates more than 730 restaurants. For more information,
visit www.chipotle.com.
Forward-Looking Statements
Certain statements in this press release, including statements
regarding our expectations for food costs and restaurant-level margins,
as well as statements under the heading “Outlook”
and elsewhere in the release related to our expected comparable
restaurant sales increases, our projected earnings per share growth, the
number of restaurants we intend to open, our effective tax rate, and our
expected number of diluted common shares, are forward-looking statements
as defined in the Private Securities Litigation Reform Act of 1995. We
use words such as “anticipate”,
“believe”, “could”,
“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: 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 uncertainty of our
ability to achieve targeted levels of comparable restaurant sales
increases; risks relating to our expansion into new markets; the risk of
food-borne illnesses and other health concerns about our food products;
changes in the availability and costs of food; changes in consumer
preferences, general economic conditions or consumer discretionary
spending; the impact of federal, state or local government regulations
relating to our employees and the sale of food or alcoholic beverages;
the impact of litigation; our ability to protect our name and logo and
other proprietary information; the potential effects of inclement
weather; the effect of competition in the restaurant industry; risks
related to our separation from McDonald’s and
our having two classes of publicly-traded common stock; 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 Web site at www.chipotle.com.
Chipotle Mexican Grill, Inc.
Consolidated Statement of Income
(in thousands, except per share data)
(unaudited)
Three months ended March 31,
2008
2007
Revenue:
Restaurant sales
$
305,327
100.0
%
$
235,484
99.7
%
Franchise royalties and fees
--
0.0
611
0.3
Total revenue
305,327
100.0
236,095
100.0
Restaurant operating costs:
Food, beverage and packaging
98,894
32.4
74,671
31.6
Labor
81,410
26.7
65,454
27.7
Occupancy
21,833
7.2
17,288
7.3
Other operating costs
38,373
12.6
29,758
12..6
General and administrative expenses
21,560
7.1
17,009
7.2
Depreciation and amortization
12,170
4.0
10,164
4.3
Pre-opening costs
2,831
0.9
1,810
0.8
Loss on disposal of assets
1,463
0.5
1,292
0.5
278,534
91.2
217,446
92.1
Income from operations
26,793
8.8
18,649
7.9
Interest income
1,343
0.4
1,490
0.6
Interest expense
(74
)
--
(75
)
--
Income before income taxes
28,062
9.2
20,064
8.5
Provision for income taxes
(10,778
)
(3.5
)
(7,624
)
(3.2
)
Net income
$
17,284
5.7
%
$
12,440
5.3
%
Earnings per share:
Basic
$
0.53
$
0.38
Diluted
$
0.52
$
0.38
Weighted average common shares outstanding:
Basic
32,808
32,558
Diluted
33,330
32,953
Chipotle Mexican Grill, Inc.
Condensed Consolidated Balance Sheet
(in thousands)
(unaudited)
As of
March 31, 2008
December 31, 2007
Total current assets
$210,676
$201,844
Total assets
$751,932
$722,115
Total current liabilities
$75,934
$73,301
Total liabilities
$170,651
$160,005
Total shareholders’ equity
$581,281
$562,110
Chipotle Mexican Grill, Inc.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
Three months ended March 31,
2008
2007
Cash provided by operating activities
$ 48,247
$30,747
Cash used in investing activities
$(12,243)
$(32,670)
Cash provided by (used in) financing activities
$ (18)
$7,183
Chipotle Mexican Grill, Inc.
Supplemental Financial Data
(dollars in thousands)
(unaudited)
For the three months ended
Mar. 31,
Dec. 31,
Sept. 30,
June 30,
Mar. 31,
2008
2007
2007
2007
2007
Number of company-operated restaurants opened
28
37
28
32
28
Franchise acquisitions
--
--
--
4
4
Restaurant relocations or closures
(2)
(1)
--
(1)
--
Number of company-operated restaurants*
730
704
668
640
605
Average restaurant sales
$1,767
$1,734
$1,708
$1,674
$1,631
Comparable restaurant sales increases
10.2%
10.6%
12.4%
11.6%
8.3%
*All restaurants are company-operated as of June 30, 2007. Excludes four
restaurants operated by franchisees as of March 31, 2007.