Key Highlights

  • Consensus EPS of 0.29 compares with second-quarter diluted EPS of 0.32 and adjusted diluted EPS of 0.33.
  • Consensus revenue of USD 3.29 billion compares with second-quarter revenues of USD 3,348,562 thousand, against USD 3,063,393 thousand.
  • Management guided full-year comparable sales growth in the low single-digit range and 350 to 370 new restaurant openings.
  • Comparable restaurant sales grew 2.2%, with a 1.2% increase in average check and a 1.0% increase in transactions.

Chipotle Mexican Grill (NYSE:CMG) reports third-quarter results on Wednesday, Oct. 28, after the market closes. Consensus stands at EPS of 0.29 on revenue of USD 3.29 billion, and the company has a market capitalization of USD 35.95 billion.

Chipotle Mexican Grill operates company-owned restaurants, many with a Chipotlane, and a digital ordering business. Second-quarter revenues were USD 3,348,562 thousand against USD 3,063,393 thousand, and net income was USD 403,547 thousand against USD 436,127 thousand.

Estimates Against Second-Quarter Results

The EPS estimate of 0.29 is below the second-quarter diluted EPS of 0.32, which matched 0.32 a year earlier, and below adjusted diluted EPS of 0.33. The estimates table does not state its EPS basis. The revenue estimate of USD 3.29 billion is below the USD 3,348,562 thousand reported.

Management gave no EPS range for the third quarter, so the comparison runs to the last reported quarter. Operating income was USD 525,595 thousand against USD 559,057 thousand, and income before income taxes was USD 533,272 thousand against USD 577,412 thousand.

What Management Guided and What It Left Open

Management guided third-quarter pricing in the mid-2% range, up from about 1.6% in the second quarter, and labor costs in the mid-25% range with low single-digit wage inflation. It put third-quarter inflation at 3% and full-year underlying tax rate guidance at 24% to 26%.

Management left open traffic, citing about 200 basis points of softening tied to an industry issue, and comparisons that become more difficult in the third quarter as the company laps increased promotional activity. It also guided full-year pricing near the high end of the 1% to 2% range communicated earlier this year.

Margin, Cost and Digital Detail

Restaurant level operating margin was 25.2%, a decrease of 220 basis points due to wage inflation and performance-based bonuses. Cost of sales was 29.7% of revenue, up 80 basis points on beef and freight inflation, and labor was 25.0% of revenue.

Digital sales were USD 1.3 billion, or 38.3% of revenue against 35.5%. The company opened 100 company-owned restaurants, 80% with a Chipotlane, and 1,000 restaurants have the high-efficiency equipment package against a target of 2,000 by the end of 2026.

Income Statement Lines, Buybacks and Cash

Food, beverage and packaging costs were USD 993,573 thousand against USD 885,989 thousand, and labor costs were USD 836,450 thousand against USD 756,261 thousand. Occupancy costs were USD 174,210 thousand against USD 154,250 thousand, and general and administrative expenses were USD 190,471 thousand against USD 172,151 thousand.

Share repurchases were USD 631 million at an average price of 32.55, with USD 1.7 billion remaining in the authorization. Management put the cash balance at USD 800 million, and Chipotle Rewards had 23 million active members. The estimates table lists a market capitalization of USD 35.95 billion.

Comparisons to Make in the Report

Reported EPS against 0.29 and revenues against USD 3.29 billion are the headline comparisons. Other markers are comparable restaurant sales, restaurant level margin and the pricing and cost commentary.