Newport Beach / CA. (cmg) Chipotle Mexican Grill Inc. reported financial results for its first quarter ended March 31, 2023. First quarter highlights, year over year:
- Total revenue increased 17.2 percent to USD 2.4 billion
- Comparable restaurant sales increased 10.9 percent
- In-restaurant sales increased 22.9 percent, while digital sales represented 39.3 percent of food and beverage revenue
- Operating margin was 15.5 percent, an increase from 9.4 percent
- Restaurant level operating margin was 25.6 percent 1, an increase of 490 basis points
- Diluted earnings per share was USD 10.50. Adjusted diluted earnings per share also was USD 10.50 as there were no adjustments this quarter, an 84.2 percent increase compared to USD 5.70 in the prior year which excluded an USD 0.11 after-tax impact from expenses related to the 2018 performance share Covid-19 related modification, corporate restructuring costs, restaurant asset impairment and closure costs, and certain legal proceedings 1
- Opened 41 new restaurants with 34 locations including a Chipotlane
«Our strong performance in the first quarter confirms that our focus on getting back to the basics and re-establishing Chipotle’s standards of excellence is beginning to drive results,» said Brian Niccol, Chairman and CEO, Chipotle. «We will continue to develop exceptional people and prepare exceptional food while treasuring each guest to further strengthen our foundation for sustained long-term growth.»
Results for the three months ended March 31, 2023
Total revenue in the first quarter was USD 2.4 billion, an increase of 17.2 percent compared to the first quarter of 2022. The increase in total revenue was driven by a 10.9 percent increase in comparable restaurant sales and new restaurant openings. In-restaurant sales in the first quarter increased 22.9 percent, compared to the first quarter of 2022, while digital sales represented 39.3 percent of total food and beverage revenue.
We opened 41 new restaurants during the first quarter with 34 locations including a Chipotlane. These formats continue to perform well and are helping enhance guest access and convenience, as well as increase new restaurant sales, margins, and returns.
Food, beverage and packaging costs in the first quarter were 29.2 percent of total revenue, a decrease of 180 basis points compared to the first quarter of 2022. Food costs benefited from menu price increases taken in the prior year and lower avocado prices, which were partially offset by inflation across several food costs, primarily dairy, tortillas, salsa, beans and rice, and a mix shift towards Garlic Guajillo Steak, a limited time menu item.
Restaurant level operating margin was 25.6 percent compared to 20.7 percent in the first quarter of 2022. The improvement was primarily due to the benefit of sales leverage and, to a lesser extent, lower avocado prices and lower delivery expense due to lower delivery volumes. These decreases were partially offset by higher inflation across several food costs and to a lesser extent, wage inflation.
General and administrative expenses for the first quarter were USD 148.3 million. This includes USD 118.9 million of underlying general and administrative expenses, USD 19.3 million of non-cash stock compensation, USD 7.2 million of payroll taxes on equity vesting and exercises and higher performance-based accruals, and USD 2.4 million related to costs associated with our biannual field leader conference.
The effective income tax rate for the first quarter was 22.5 percent compared to 16.7 percent in the first quarter of 2022. The increase in the effective income tax rate was primarily due to a decrease in tax benefits related to option exercises and equity vesting as compared to the first quarter of 2022.
Net income for the first quarter was USD 291.6 million, or USD 10.50 per diluted share, compared to USD 158.3 million, or USD 5.59 per diluted share, in the first quarter of 2022. In the first quarter of 2022, excluding the USD 0.11 after-tax impact of expenses related to the 2018 performance share Covid-19 related modification, corporate restructuring costs, restaurant asset impairment and closure costs, and certain legal proceedings, adjusted diluted earnings per share was USD 5.70.
We repurchased USD 131.6 million of stock at an average price per share of USD 1,552.90 during the first quarter. As of March 31, 2023, USD 282.3 million remained available under share repurchase authorizations from our Board of Directors. The repurchase authorization may be modified, suspended, or discontinued at any time.
More information will be available in our Quarterly Report on Form 10-Q, which will be filed with the SEC by the end of April.
Outlook
For 2023, management is anticipating the following:
- Second quarter and full year comparable restaurant sales growth in the mid to high-single digit range
- 255 to 285 new restaurant openings (including 10 to 15 relocations to add a Chipotlane), which assumes utility, construction, permit and material supply delays do not worsen
- An estimated underlying effective full year tax rate between 25 percent and 27 percent before discrete items
Definitions
The following definitions apply to these terms as used throughout this release:
- Comparable restaurant sales, or sales comps, and comparable restaurant transactions, represent the change in period-over-period total revenue or transactions for restaurants in operation for at least 13 full calendar months.
- Average restaurant sales refer to the average trailing 12-month food and beverage revenue for restaurants in operation for at least 12 full calendar months.
- Restaurant level operating margin represents total revenue less direct restaurant operating costs, expressed as a percent of total revenue.
- Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators. Digital sales include revenue deferrals associated with Chipotle Rewards.
- In-restaurant sales represent food and beverage revenue generated on-premise. In-restaurant sales includes revenue deferrals associated with Chipotle Rewards.
