Chipotle: Announces Third Quarter 2022 Results

Newport Beach / CA. (cmg) Chipotle Mexican Grill Inc. reported financial results for its third quarter ended September 30, 2022.

Third quarter highlights, year over year

  • Total revenue increased 13.7 percent to USD 2.2 billion
  • Comparable restaurant sales increased 7.6 percent
  • In-restaurant sales increased 22.1 percent, while digital sales1 represented 37.2 percent of food and beverage revenue
  • Operating margin was 15.1 percent, an increase from 12.3 percent
  • Restaurant level operating margin was 25.3 percent 2, an increase of 180 basis points
  • Diluted earnings per share was USD 9.20, a 28.1 percent increase from USD 7.18. Adjusted diluted earnings per share, which excluded a USD 0.31 after-tax impact from expenses related to an employee separation, impairment of certain corporate and restaurant assets, corporate restructuring, and expenses related to the 2018 performance share Covid-19 related modification, was USD 9.51, a 35.5 percent increase from USD 7.02 2
  • Opened 43 new restaurants with 38 locations including a Chipotlane

«Our performance in the third quarter confirms our brand and value proposition remain strong, even during a challenging economic environment» said Brian Niccol, Chairman and CEO, Chipotle. «With consumer discretionary spending tightening, we are focused on running great restaurants and delivering excellent customer and employee experiences.»

Results for the three months ended September 30, 2022

Total revenue in the third quarter was USD 2.2 billion, an increase of 13.7 percent compared to the third quarter of 2021. The increase in total revenue was driven by a 7.6 percent increase in comparable restaurant sales and new restaurant openings. Our in-restaurant sales increased 22.1 percent in the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, while digital sales represented 37.2 percent of total food and beverage revenue.

We opened 43 new restaurants during the third quarter with 38 locations including a Chipotlane. These formats continue to perform very 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 third quarter were 29.8 percent of total revenue, a decrease of 50 basis points compared to the third quarter of 2021. The benefit of menu price increases were partially offset by inflation across the menu primarily due to higher costs for dairy, packaging, tortillas and avocados.

Restaurant level operating margin was 25.3 percent, an increase from 23.5 percent in the third quarter of 2021. The increase was primarily due to the benefit of sales leverage and, to a lesser extent, lower delivery fees associated with a lower volume of delivery transactions, partially offset by higher food costs and increases in hourly wages.

General and administrative expenses for the third quarter were USD 140.9 million on a GAAP basis, or USD 135.6 million2 on a non-GAAP basis, excluding USD 3.5 million of employee separation costs, USD 1 million related to corporate restructuring, and USD 0.8 million for a Covid-19 related modification to our 2018 performance shares made in December 2020. GAAP and non-GAAP general and administrative expenses for the third quarter of 2022 also include USD 114.9 million of underlying general and administrative expenses, and USD 21.4 million of non-cash stock compensation.

The GAAP effective income tax rate was 24.4 percent for the third quarter, which increased from 14.7 percent in the third quarter of 2021, primarily due to a decrease in tax benefits related to option exercises and equity vesting, and to a lesser extent a larger return to provision tax benefit recorded in the third quarter of 2021 as compared to the third quarter of 2022.

Net income for the third quarter was USD 257.1 million, or USD 9.20 per diluted share, an increase from USD 204.4 million, or USD 7.18 per diluted share, in the third quarter of 2021. Excluding the after-tax impact of expenses related to employee separation costs, impairment of certain corporate and restaurant assets, corporate restructuring, and expenses related to the 2018 performance share modification, adjusted net income was USD 265.8 million2 and adjusted diluted earnings per share was USD 9.512.

During the third 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 412.8 million was available as of September 30, 2022. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased USD 106.9 million of stock at an average price per share of USD 1,437.87 during Q3-2022.

Outlook

For 2022, management is anticipating the following:

  • Fourth quarter comparable restaurant sales growth in the mid to high-single digits
  • Between 235 to 250 new restaurant openings (including 10 to 15 relocations to add a Chipotlane), which assumes construction, permit and material supply delays don’t worsen
  • An estimated underlying effective full year tax rate between 25 percent and 27 percent before discrete items

For 2023, management is anticipating the following:

  • 255 to 285 new restaurant openings

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 includes 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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