CHIPOTLE ANNOUNCES THIRD QUARTER 2023 RESULTS
NEWPORT BEACH, Calif., Oct. 26, 2023
COMPARABLE SALES INCREASE 5% DRIVEN BY TRANSACTION GROWTH AS MARGINS EXPAND
NEWPORT BEACH, Calif., Oct. 26, 2023 — Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its third quarter ended September 30, 2023.
Third quarter highlights, year over year:
-- Total revenue increased 11.3% to $2.5 billion
-- Comparable restaurant sales increased 5.0%
-- Operating margin was 16.0%, an increase from 15.1%
-- Restaurant level operating margin was 26.3% 1, an increase of 100 basis
points
-- Diluted earnings per share was $11.32, a 23.0% increase from $9.20.
Adjusted diluted earnings per share, which excluded a $0.04 after-tax
impact from expenses related to corporate restructuring, was $11.361, a
19.5% increase from $9.511.
-- 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 $2.5 billion, an increase of 11.3% compared to the third quarter of 2022. The increase in total revenue was driven by new restaurant openings, and a 5.0% increase in comparable restaurant sales attributable to higher transactions and, to a lesser extent, an increase in average check. Digital sales represented 36.6% 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% 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% compared to 25.3% 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 $159.5 million on a GAAP basis, or $158.2 million on a non-GAAP basis, excluding $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 $119.3 million of underlying general and administrative expenses, $34.3 million of non-cash stock compensation, $3.4 million of higher performance-based accruals and payroll taxes on equity vesting and exercises and $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% compared to 24.4% 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 $313.2 million, or $11.32 per diluted share, compared to $257.1 million, or $9.20 per diluted share, in the third quarter of 2022. In the third quarter of 2023, excluding the $0.04 after-tax impact from expenses related to corporate restructuring, adjusted diluted earnings per share was $11.36.
During the third quarter, our Board of Directors approved the investment of up to an additional $300 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, $368.4 million was available as of September 30, 2023. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased $226.3 million of stock at an average price per share of $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% and 27%
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.
Conference Call Details
Chipotle will host a conference call on Thursday, October 26, 2023, at 4:30 PM Eastern time to discuss third quarter 2023 financial results as well as provide a business update for the fourth quarter 2023.
The conference call can be accessed live over the phone by dialing 1-888-317-6003, or for international callers by dialing 1-412-317-6061, and use code: 3311473. The call will be webcast live from the company’s website on the investor relations page at ir.chipotle.com/events. An archived webcast will be available approximately one hour after the end of the call.
About Chipotle
Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better world by serving responsibly sourced, classically-cooked, real food with wholesome ingredients without artificial colors, flavors or preservatives. Chipotle had over 3,300 restaurants as of September 30, 2023, in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants in North America and Europe. Chipotle is ranked on the Fortune 500 and is recognized on the 2023 list for Fortune’s Most Admired Companies and Time Magazine’s Most Influential Companies. With over 110,000 employees passionate about providing a great guest experience, Chipotle is a longtime leader and innovator in the food industry. Chipotle is committed to making its food more accessible to everyone while continuing to be a brand with a demonstrated purpose as it leads the way in digital, technology and sustainable business practices. For more information or to place an order online, visit WWW.CHIPOTLE.COM.