icon
icon
icon
icon
Upgrade
icon

CMG hits all time high as pricing power drives operating margin expansion

AInvestWednesday, Feb 7, 2024 4:37 am ET
1min read

Chipotle Mexican Grill (CMG) announced its impressive fourth-quarter earnings, surpassing analysts' expectations and demonstrating robust growth. 

Chipotle reported adjusted earnings per share (EPS) of $10.36, outperforming the estimated $9.71. This was a significant increase from the previous year's $8.29. Diluted EPS stood at $10.21, representing a 27.3% surge from the prior year's $8.02.

The Q4 revenue also saw solid growth, reaching $2.52 billion, a 15% year-on-year increase, slightly surpassing estimates of $2.49 billion. 

The company reported comparable store sales of 8.4% increase compared to the previous year's 5.6%. This exceeded the estimated growth rate of 7.1%. The growth was driven by a surge in transactions of 7.4% and a 1.0% increase in average check. 

Operating margin also showed improvement, rising to 14.4% in Q4, compared to the previous year's 13.6%. At the restaurant level, the operating margin reached an impressive 25.4%, reflecting a notable increase of 140 basis points. This improvement was primarily due to sales leverage and lower paper costs, partially offset by inflation in food costs and wage inflation. Despite cost increases in food, beverage, and packaging, Chipotle managed to mitigate these expenses through price increases on its menu. Higher costs of beef, produce, and queso were offset by the benefits of higher menu prices and reduced paper costs. 

A significant aspect of Chipotle's success lies in its digital sales, which accounted for 36.1% of total food and beverage revenue. This highlights the company's effective digital strategy, which has likely contributed to its strong performance during the ongoing pandemic. 

Looking ahead to 2024, Chipotle's management anticipates mid-single digit growth in comparable restaurant sales for the full year. The company's CEO acknowledged weather-related impacts in January; however, sales trends strengthened as the weather normalized. 

Chipotle also announced that it has authorized the repurchase of up to an additional $200 million of its common stock, subject to market conditions. 

Shares of CMG hit an all-time high of $2586 in after-hours trading. It has pulled back to the $2550 area where it is finding support. 

Overall, Chipotle's Q4 earnings report demonstrates its ability to consistently deliver strong financial results. The company's focus on innovation, digital sales, and operational efficiency continues to drive growth and customer satisfaction. With solid comparable sales growth, expanding restaurant locations, and a promising outlook for 2024, Chipotle remains a compelling player in the food industry.


Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.