Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported
financial results for its first quarter ended March 31, 2016.
Highlights for the first quarter of 2016 as compared to the
first quarter of 2015 include:
- Revenue decreased 23.4% to $834.5
million
- Comparable restaurant sales decreased
29.7%
- Comparable restaurant transactions
decreased 21.1%
- Restaurant level operating margin was
6.8%, a decrease from 27.5%
- Net loss was $26.4 million, a decrease
from net income of $122.6 million
- Diluted loss per share was $0.88, a
decrease from diluted earnings per share of $3.88
- Opened 58 new restaurants
“As our sales are on a gradual path to recovery, we remain
focused on our mission of changing the way people think about and
eat fast food. The best approach to re-building our business is to
proudly serve safe and delicious food in our high-quality
restaurants every single day, which is exactly what we will
continue to do,” said Steve Ells, founder, chairman and co-CEO of
Chipotle.
First quarter 2016 results
Revenue for the quarter was $834.5 million, down 23.4% from the
first quarter of 2015. The decrease in revenue was driven by a
29.7% decrease in comparable restaurant sales, partially offset by
sales from new restaurant openings. Comparable restaurant sales
declined primarily as a result of a decrease in the number of
transactions in our restaurants, and to a lesser extent by a
decline in average check, including an impact from sales
promotions.
We opened 58 new restaurants during the quarter, bringing the
total restaurant count to 2,066.
Food costs were 35.3% of revenue, an increase of 140 basis
points as compared to the first quarter of 2015. The increase was
driven by food testing and waste costs, and increased costs for
pre-cut produce items. Increases in food costs were partially
offset by relief in beef prices.
Restaurant level operating margin was 6.8% in the quarter, a
decrease from 27.5% in the first quarter of 2015. The decrease was
primarily driven by unfavorable sales leverage, and to a lesser
extent by higher than usual marketing and promotional costs, and
food testing and waste costs.
General and administrative expenses were 7.4% of revenue for the
first quarter of 2016, an increase of 160 basis points over the
first quarter of 2015 due to sales deleverage, partially offset by
lower non-cash stock based compensation expense.
Net loss for the first quarter of 2016 was $26.4 million, or
$0.88 per diluted share, compared to net income of $122.6 million,
or $3.88 per diluted share, in the first quarter of 2015.
“Our restaurants and leadership teams have worked hard to
overcome the challenges of the first quarter. What is most
important is that we continue to build teams of top performers in
our restaurants, and among our field leadership, which will allow
us to continue to improve on our already high standards and
exceptional customer experience. We have some of the best employees
in the industry, which continues to serve as a competitive
advantage, and we will continue to invest in our people culture to
help expedite the next stage of growth for Chipotle,” said Monty
Moran, co-CEO
Outlook
For 2016, management expects the following:
- 220 - 235 new restaurant openings
- An effective full year tax rate of
approximately 38.4%
Definitions
The following definitions apply to these terms as used
throughout this release:
Comparable restaurant sales represent the change in
period-over-period sales for restaurants in operation for at least
13 full calendar months.
Average restaurant sales refers to the average trailing
12-month sales for restaurants in operation for at least 12 full
calendar months.
Restaurant level operating margin represents total
revenue less restaurant operating costs, expressed as a percent of
total revenue.
Conference Call
Chipotle will host a conference call to discuss the first
quarter 2016 financial results on Tuesday, April 26, 2016 at 5:00
PM Eastern time.
The conference call can be accessed live over the phone by
dialing 1-877-718-5107 or for international callers by dialing
1-719-325-4797. A replay will be available one hour after the call
and can be accessed by dialing 1-877-870-5176 or 1-858-384-5517 for
international callers; the password is 4763274. The replay will be
available until May 3, 2016. The call will be webcast live from the
company's website at chipotle.com under the investor relations
section. An archived webcast will be available approximately one
hour after the end of the call.
About Chipotle
Steve Ells, founder, chairman and co-CEO, started Chipotle with
the idea that food served fast did not have to be a typical fast
food experience. Today, Chipotle continues to offer a focused menu
of burritos, tacos, burrito bowls (a burrito without the tortilla)
and salads made from fresh, high-quality ingredients, prepared
using classic cooking methods and served in a distinctive
atmosphere. Through our vision of Food With Integrity, Chipotle is
seeking better food from using ingredients that are not only fresh,
but that—where possible—are sustainably grown and raised
responsibly with respect for the animals, the land, and the farmers
who produce the food. In order to achieve this vision, we
focus on building a special people culture that is centered on
creating teams of top performers empowered to achieve high
standards. This people culture not only leads to a better dining
experience for our customers, it also allows us to develop future
leaders from within. Chipotle opened with a single restaurant in
1993 and operates more than 2,000 restaurants, including 25
Chipotle restaurants outside the US and 14 ShopHouse Southeast
Asian Kitchen restaurants, and is an investor in an entity that
owns and operates four Pizzeria Locale restaurants. For more
information, visit Chipotle.com.
Forward-Looking Statements
Certain statements in this press release, including statements
regarding sales recovery, as well as statements under the heading
“Outlook” of our expected number of new restaurant openings and
effective tax rates in 2016, are forward-looking statements as
defined in the Private Securities Litigation Reform Act of 1995. We
use words such as “anticipate”, “believe”, “could”, “should”,
“estimate”, “expect”, “intend”, “may”, “predict”, “project”,
“target”, and similar terms and phrases, including references to
assumptions, to identify forward-looking statements. The
forward-looking statements in this press release are based on
information available to us as of the date any such statements are
made and we assume no obligation to update these forward-looking
statements. These statements are subject to risks and uncertainties
that could cause actual results to differ materially from those
described in the statements. These risks and uncertainties include,
but are not limited to, the following: the uncertainty of our
ability to achieve expected levels of comparable restaurant sales
comparisons due to factors such as changes in consumers’ acceptance
of and enthusiasm for our brand, including as a result of recent
food-borne illness incidents, the impact of competition, decreased
overall consumer spending, or our possible inability to increase
menu prices or realize the benefits of menu price increases; the
risk of food-borne illnesses and other health concerns about our
food or dining out generally; factors that could affect our ability
to achieve and manage our planned expansion, such as the
availability of a sufficient number of suitable new restaurant
sites and the availability of qualified employees; the performance
of new restaurants and their impact on existing restaurant sales;
increases in the cost of food ingredients and other key supplies or
higher food costs due to new supply chain protocols; the potential
for increased labor costs or difficulty retaining qualified
employees, including as a result of market pressures, enhanced food
safety procedures in our restaurants, or new regulatory
requirements; risks relating to our expansion into new markets; the
impact of federal, state or local government regulations relating
to our employees, our restaurant design, or the sale of food or
alcoholic beverages; risks associated with our Food With Integrity
strategy, including supply shortages and potential liabilities from
advertising claims and other marketing activities related to Food
With Integrity; security risks associated with the acceptance of
electronic payment cards or electronic storage and processing of
confidential customer or employee information; risks relating to
litigation, including possible governmental actions related to
food-borne illness incidents, as well as class action litigation
regarding employment laws, advertising claims or other matters;
risks relating to our insurance coverage and self-insurance; our
dependence on key personnel; risks related to our marketing and
advertising strategies and our ability to protect our brand and
reputation; risks associated with our ability to effectively manage
our growth; and other risk factors described from time to time in
our SEC reports, including our most recent annual report on Form
10-K and subsequent quarterly reports on Form 10-Q, all of which
are available on our website at chipotle.com.
Chipotle Mexican Grill, Inc.
Condensed Consolidated Statement of
Income and Comprehensive Income
(in thousands, except per share
data)
(unaudited)
Three months ended March 31, 2016 2015
Revenue $ 834,459 100.0 % $ 1,089,043 100.0
%
Restaurant operating costs (exclusive of
depreciation andamortization shown separately below):
Food, beverage and packaging 294,166 35.3 369,026 33.9 Labor
257,681 30.9 244,151 22.4 Occupancy 70,592 8.5 63,185 5.8 Other
operating costs 155,189 18.6 113,541 10.4 General and
administrative expenses 62,010 7.4 63,061 5.8 Depreciation and
amortization 34,788 4.2 30,643 2.8 Pre-opening costs 4,421 0.5
3,435 0.3 Loss on disposal of assets 2,216 0.3
4,200 0.4 Total operating
expenses 881,063 105.6 891,242
81.8 Income (loss) from operations (46,604 )
(5.6 ) 197,801 18.2 Interest and other income (expense), net
2,126 0.3 1,223 0.1
Income (loss) before income taxes (44,478 ) (5.3 ) 199,024
18.3 Benefit (provision) for income taxes 18,046 2.2
(76,383 ) (7.0 ) Net income (loss) $
(26,432 ) (3.2 ) % $ 122,641 11.3 % Other
comprehensive income (loss), net of income taxes: Foreign currency
translation adjustments 1,929 (4,712 )
Unrealized gain (loss) on investments, net
of income taxesof $1,182 and $0
1,893 - Other comprehensive income
(loss), net of income taxes 3,822 (4,712 )
Comprehensive income (loss) $ (22,610 ) $ 117,929 Earnings
(loss) per share: Basic $ (0.88 ) $ 3.95 Diluted $ (0.88 ) $
3.88 Weighted average common shares outstanding: Basic
29,893 31,036 Diluted 29,893
31,592
Chipotle Mexican
Grill, Inc.
Condensed Consolidated Balance
Sheet
(in thousands, except per share
data)
March 31, December 31, 2016
2015 (unaudited) Assets Current assets: Cash
and cash equivalents $ 250,805 $ 248,005
Accounts receivable, net of allowance for
doubtful accounts of $1,136 and $1,176 as ofMarch 31, 2016 and
December 31, 2015, respectively
23,692 38,283 Inventory 16,885 15,043 Prepaid expenses and other
current assets 48,317 39,965 Income tax receivable 35,041 58,152
Investments - 415,199 Total current
assets 374,740 814,647 Leasehold improvements, property and
equipment, net 1,241,602 1,217,220 Long term investments 455,679
622,939 Other assets 46,860 48,321 Goodwill 21,939
21,939 Total assets $ 2,140,820 $ 2,725,066
Liabilities and shareholders' equity Current
liabilities: Accounts payable $ 76,606 $ 85,709 Accrued payroll and
benefits 80,606 64,958 Accrued liabilities 114,751
129,275 Total current liabilities 271,963 279,942
Deferred rent 260,652 251,962 Deferred income tax liability 35,735
32,305 Other liabilities 32,216 32,883
Total liabilities 600,566 597,092
Shareholders' equity:
Preferred stock, $0.01 par value, 600,000
shares authorized, no shares issued as of March 31,2016 and
December 31, 2015, respectively
- -
Common stock $0.01 par value, 230,000
shares authorized, and 35,797 and 35,790 sharesissued as of March
31, 2016 and December 31, 2015, respectively
358 358 Additional paid-in capital 1,184,143 1,172,628
Treasury stock, at cost, 6,449 and 5,206
common shares at March 31, 2016 and December 31,2015,
respectively
(1,811,237 ) (1,234,612 ) Accumulated other comprehensive income
(loss) (4,451 ) (8,273 ) Retained earnings 2,171,441
2,197,873 Total shareholders' equity 1,540,254
2,127,974 Total liabilities and shareholders'
equity $ 2,140,820 $ 2,725,066
Chipotle Mexican
Grill, Inc.
Condensed Consolidated Statement of
Cash Flows
(unaudited)
(in thousands)
Three months ended March 31, 2016 2015
Operating activities Net income (loss) $ (26,432 ) $ 122,641
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: Depreciation and amortization 34,788 30,643
Deferred income tax (benefit) provision 2,259 (5,551 ) Loss on
disposal of assets 2,216 4,200 Bad debt allowance (40 ) (27 )
Stock-based compensation expense 10,505 16,986 Excess tax benefit
on stock-based compensation (680 ) (10,827 ) Other (174 ) 119
Changes in operating assets and liabilities: Accounts receivable
14,642 13,300 Inventory (1,833 ) (737 ) Prepaid expenses and other
current assets (8,337 ) (2,516 ) Other assets 1,468 (3,825 )
Accounts payable (8,852 ) 14,831 Accrued liabilities 10,397 (21,367
) Income tax payable/receivable 23,796 75,314 Deferred rent 8,569
6,780 Other long-term liabilities (613 ) 2,755
Net cash provided by operating activities 61,679
242,719
Investing activities Purchases of
leasehold improvements, property and equipment (62,921 ) (59,363 )
Purchases of investments - (139,114 ) Maturities of investments
45,000 95,000 Proceeds from sale of investments 540,648
- Net cash provided by (used in) investing
activities 522,727 (103,477 )
Financing
activities Acquisition of treasury stock (583,802 ) (23,249 )
Excess tax benefit on stock-based compensation 680 10,827 Stock
plan transactions and other financing activities (10 )
(119 ) Net cash used in financing activities (583,132
) (12,541 ) Effect of exchange rate changes on cash and cash
equivalents 1,526 (3,209 ) Net change in cash and cash equivalents
2,800 123,492 Cash and cash equivalents at beginning of period
248,005 419,465 Cash and cash
equivalents at end of period $ 250,805 $ 542,957
Chipotle Mexican
Grill, Inc.
Supplemental Financial and Other
Data
(dollars in thousands)
For the three months ended Mar. 31, Dec.
31, Sep. 30, Jun. 30, Mar. 31, 2016
2015 2015 2015 2015 Number of
restaurants opened 58 79 53 48 49 Restaurant relocations (2 ) - -
(1 ) (1 ) Number of restaurants at end of period 2,066 2,010 1,931
1,878 1,831 Average restaurant sales $ 2,230 $ 2,424 $ 2,532 $
2,530 $ 2,516
Comparable restaurant sales
increase(decrease)
(29.7 %) (14.6 %) 2.6 % 4.3 % 10.4 %
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