Chipotle Announces Fourth Quarter And Full Year 2023 Results

Newport Beach / CA. (cmg) Chipotle Mexican Grill Inc. reported financial results for its fourth quarter and fiscal year ended December 31, 2023.

Fourth quarter highlights, year over year

  • Total revenue increased 15.4 percent to USD 2.5 billion
  • Comparable restaurant sales increased 8.4 percent
  • Operating margin was 14.4 percent, an increase from 13.6 percent
  • Restaurant level operating margin was 25.4 percent, an increase of 140 basis points
  • Diluted earnings per share was USD 10.21, a 27.3 percent increase from USD 8.02. Adjusted diluted earnings per share, which excluded a USD 0.15 after-tax impact from expenses related to accelerated depreciation, partially offset by a reduction in contingencies related to certain legal proceedings, was USD 10.36, a 25.0 percent increase from USD 8.29.
  • Opened 121 new restaurants with 110 locations including a Chipotlane

Full year 2023 highlights, year over year

  • Total revenue increased 14.3 percent to USD 9.9 billion
  • Comparable restaurant sales increased 7.9 percent
  • Operating margin was 15.8 percent, an increase from 13.4 percent
  • Restaurant level operating margin was 26.2 percent, an increase of 230 basis points
  • Diluted earnings per share was USD 44.34, a 38.4 percent increase from USD 32.04. Adjusted diluted earnings per share, which excluded a USD 0.52 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs, accelerated depreciation and corporate restructuring, partially offset by a reduction in contingencies related to certain legal proceedings, was USD 44.86, a 36.9 percent increase from USD 32.78.
  • Opened 271 new restaurants with 238 locations including a Chipotlane

«2023 was an outstanding year where we delivered strong transaction growth driven by throughput and menu innovation, opened a record number of new restaurants, surpassed USD 3 million in AUVs and formed our first international partnership,» said Brian Niccol, Chairman and CEO. «I am more confident than ever that we have the right people and the right strategy to achieve our long-term growth goals of reaching 7,000 restaurants in North America, USD 4 million in AUVs, expanding our industry leading margins and returns and furthering our purpose of Cultivating a Better World globally.»

Results for the three months ended December 31, 2023

Total revenue in the fourth quarter was USD 2.5 billion, an increase of 15.4 percent compared to the fourth quarter of 2022. The increase in total revenue was driven by an 8.4 percent increase in comparable restaurant sales attributable to higher transactions of 7.4 percent and an increase in average check of 1.0 percent, and to a lesser extent, new restaurant openings. Digital sales represented 36.1 percent of total food and beverage revenue.

We opened 121 new restaurants during the fourth quarter with 110 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 fourth quarter were 29.7 percent of total revenue, an increase of 40 basis points compared to the fourth quarter of 2022. Food costs increased due to a higher mix of beef as well as inflation across the menu, most notably higher costs for beef, produce, and queso. These increases were partially offset by the benefit of menu price increases and, to a lesser extent, lower paper costs.

Restaurant level operating margin in the fourth quarter was 25.4 percent compared to 24.0 percent in the fourth quarter of 2022. The improvement was primarily due to the benefit of sales leverage and, to a lesser extent, lower paper costs. 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 fourth quarter were USD 169.2 million on a GAAP basis, or USD 170.0 million on a non-GAAP basis, excluding a USD 0.8 million reduction in contingencies related to certain legal proceedings. GAAP and non-GAAP general and administrative expenses for the fourth quarter also include USD 122.0 million of underlying general and administrative expenses, USD 35.7 million of non-cash stock compensation, USD 10.1 million of higher bonus accruals and payroll taxes on equity vesting and exercises and USD 2.2 million of other costs, primarily related to our upcoming All Managers Conference scheduled for the first quarter of 2024.

The effective income tax rate for the fourth quarter was 26.2 percent compared to 26.3 percent in the fourth quarter of 2022. The slight decrease in the tax rate was primarily due to an increase in tax benefits from option exercises and equity vesting, partially offset by an increase in tax reserves and nondeductible expenses.

Net income for the fourth quarter was USD 282.1 million, or USD 10.21 per diluted share, compared to USD 223.7 million, or USD 8.02 per diluted share, in the fourth quarter of 2022. Excluding a USD 0.15 after-tax impact from expenses related to accelerated depreciation, partially offset by a reduction in contingencies related to certain legal proceedings, adjusted net income was USD 286.2 million and adjusted diluted earnings per share was USD 10.36.

During the fourth quarter, our Board of Directors approved the investment of up to an additional USD 200 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, USD 424.1 million was available as of December 31, 2023. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased USD 144.3 million of stock at an average price per share of USD 1,935.80 during the fourth quarter.

Results for the full year ended December 31, 2023

Total revenue for 2023 was USD 9.9 billion, an increase of 14.3 percent compared to 2022. The increase in total revenue was driven by a 7.9 percent increase in comparable restaurant sales attributable to higher transactions of 5.0 percent and an increase in average check of 2.9 percent and, to a lesser extent, new restaurant openings. Digital sales represented 37.4 percent of total food and beverage revenue.

We opened 271 new restaurants during 2023, bringing the total restaurant count at year-end to 3,437. Of the 271 new restaurants opened during the year, 238 locations included a Chipotlane. We had a total of 811 Chipotlanes as of year-end, which includes conversions of existing restaurants.

Food, beverage and packaging costs for 2023 were 29.5 percent of total revenue, a decrease of 60 basis points compared to 2022. Food costs benefited from menu price increases and, to a lesser extent, lower avocado costs. These benefits were partially offset by inflation across several ingredient costs, most notably beef, tortillas, and queso.

Restaurant level operating margin for 2023 was 26.2 percent compared to 23.9 percent in 2022. The improvement was primarily due to the benefit of sales leverage and, to a lesser extent, lower avocado prices. These decreases were partially offset by higher inflation across several food costs and, to a lesser extent, wage inflation.

General and administrative expenses for 2023 were USD 633.6 million on a GAAP basis, or USD 629.6 million on a non-GAAP basis, excluding USD 4.8 million of corporate restructuring costs and a USD 0.8 million reduction in contingencies related to certain legal proceedings. GAAP and non-GAAP General and administrative expenses for full year 2023 also include USD 478.9 million of underlying general and administrative expenses, USD 118.5 million of non-cash stock compensation, USD 25.3 million of higher bonus accruals and payroll taxes on equity vesting and exercises and USD 6.9 million of other costs, primarily related to our upcoming All Managers Conference scheduled for the first quarter of 2024.

The effective income tax rate for 2023 was 24.2 percent compared to 23.9 percent in 2022. The increase in the tax rate was primarily due to fewer tax benefits related to option exercises and equity vesting.

Net income for 2023 was USD 1.23 billion, or USD 44.34 per diluted share, compared to net income of USD 899.1 million, or USD 32.04 per diluted share for 2022. Excluding a USD 0.52 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs, accelerated depreciation, corporate restructuring, partially offset by a reduction in contingencies related to certain legal proceedings, adjusted net income for 2023 was USD 1.24 billion and adjusted diluted earnings per share was USD 44.86.

During 2023 we repurchased a total of USD 589.8 million of stock at an average price per share of USD 1,827.46.

More information will be available in our Annual Report on Form 10-K, which will be filed with the SEC in early February 2024.

Outlook

For 2024, management is anticipating the following:

  • Full year comparable restaurant sales growth in the mid-single digit range
  • 285 to 315 new restaurant openings, which assumes developer, permit, inspection, and utility 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.
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