Chipotle: Announces Third Quarter 2023 Results

Newport Beach / CA. (cmg) Chipotle Mexican Grill Inc. reported financial results for its third quarter ended September 30, 2023.

Third quarter highlights, year over year

  • Total revenue increased 11.3 percent to USD 2.5 billion
  • Comparable restaurant sales increased 5.0 percent
  • Operating margin was 16.0 percent, an increase from 15.1 percent
  • Restaurant level operating margin was 26.3 percent, an increase of 100 basis points
  • Diluted earnings per share was USD 11.32, a 23.0 percent increase from USD 9.20. Adjusted diluted earnings per share, which excluded a USD 0.04 after-tax impact from expenses related to corporate restructuring, was USD 11.361, a 19.5 percent increase from USD 9.51.
  • Opened 62 new restaurants with 54 locations including a Chipotlane

«Chipotle’s value proposition including customized, delicious culinary served quickly with great hospitality, is stronger than ever which is translating to great results including sustained positive transaction growth. We remain focused on developing exceptional people, preparing delicious food and fast throughput which will further strengthen our brand and continue to position us for long term growth,» said Brian Niccol, Chairman and CEO, Chipotle.

Results for the three months ended September 30, 2023

Total revenue in the third quarter was USD 2.5 billion, an increase of 11.3 percent compared to the third quarter of 2022. The increase in total revenue was driven by new restaurant openings, and a 5.0 percent increase in comparable restaurant sales attributable to higher transactions and, to a lesser extent, an increase in average check. Digital sales represented 36.6 percent of total food and beverage revenue.

We opened 62 new restaurants during the third quarter with 54 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 third quarter were 29.7 percent of total revenue, a decrease of about 10 basis points compared to the third quarter of 2022. The benefit from last year’s menu price increases was mostly offset by inflation across several food costs, primarily beef and queso.

Restaurant level operating margin in the third quarter was 26.3 percent compared to 25.3 percent in the third quarter of 2022. The improvement was primarily due to the benefit of sales leverage, partially offset by higher inflation across several food costs and, to a lesser extent, wage inflation.

General and administrative expenses for the third quarter were USD 159.5 million on a GAAP basis, or USD 158.2 million on a non-GAAP basis, excluding USD 1.3 million of corporate restructuring costs related to the May 2023 optimization of our organizational structure. GAAP and non-GAAP general and administrative expenses for the third quarter also include USD 119.3 million of underlying general and administrative expenses, USD 34.3 million of non-cash stock compensation, USD 3.4 million of higher performance-based accruals and payroll taxes on equity vesting and exercises and USD 1.2 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 third quarter was 24.2 percent compared to 24.4 percent in the third quarter of 2022. The decrease in the effective income tax rate was primarily due to a decrease in uncertain tax position reserves and higher income tax credits, mostly offset by a decrease in tax benefits from option exercises and equity vesting.

Net income for the third quarter was USD 313.2 million, or USD 11.32 per diluted share, compared to USD 257.1 million, or USD 9.20 per diluted share, in the third quarter of 2022. In the third quarter of 2023, excluding the USD 0.04 after-tax impact from expenses related to corporate restructuring, adjusted diluted earnings per share was USD 11.36.

During the third quarter, our Board of Directors approved the investment of up to an additional USD 300 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, USD 368.4 million was available as of September 30, 2023. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased USD 226.3 million of stock at an average price per share of USD 1,913.98 during the third quarter.

More information will be available in our Quarterly Report on Form 10-Q, which will be filed with the SEC by the end of October.

Outlook

For 2023, management is anticipating the following:

  • Fourth 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 inspection delays do not worsen
  • An estimated underlying effective full year tax rate between 25 percent and 27 percent before discrete items
  • For 2024, management is anticipating the following:
  • 285 to 315 new restaurant openings, which assumes utility, construction, permit and inspection delays do not worsen

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.