Chipotle Mexican Grill Announces Second Quarter 2011 Results


Chipotle Mexican Grill Announces Second Quarter 2011 ResultsChipotle Mexican Grill has reported financial results for its second quarter ended June 30, 2011.

Highlights for the second quarter of 2011 as compared to the second quarter of 2010 include:

  • Revenue increased 22.4% to $571.6 million
  • Comparable restaurant sales increased 10.0%
  • Restaurant level operating margin was 25.8%, a decrease of 110 basis points
  • Net income was $50.7 million, an increase of 9.0%
  • Diluted earnings per share was $1.59, an increase of 8.9%

Highlights for the six months ended June 30, 2011 as compared to the prior year include:

  • Revenue increased 23.3% to $1.08 billion
  • Comparable restaurant sales increased 11.1%
  • Restaurant level operating margin was 25.5%, a decrease of 100 basis points
  • Net income was $97.0 million, an increase of 15.1%
  • Diluted earnings per share was $3.06, an increase of 15.5%

“We are continuing to focus on our efforts to serve better tasting food, made with ingredients from more sustainable sources, and on building a people culture that delights our customers and allows us to develop the future leaders we will need to support our growth. In spite of some cost challenges during the quarter, we continue to believe that our relentless focus on these things, which really drive our business, will allow us to produce great results for our shareholders over the long term,” said Steve Ells, founder, chairman and co-CEO of Chipotle.

Second quarter 2011 results

Revenue for the quarter was $571.6 million, up 22.4% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and a 10.0% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic in the quarter.

During the quarter Chipotle opened 39 new restaurants, bringing the total restaurant count to 1,131.

Restaurant level operating margin was 25.8% in the quarter, a decrease of 110 basis points over the prior year period. The decrease was primarily driven by food cost inflation partially offset by leverage from comparable restaurant sales growth.

G&A costs were 7.3% of revenue, up 80 basis points from the prior year period. The increase as a percent of revenue was driven by an increase in non-cash stock-based compensation and by higher legal costs.

Results for the quarter were also impacted by the loss on Chipotle’s investment in ANGR Holdings, LLC, which operated the restaurants awarded on the television program America’s Next Great Restaurant prior to their closure. The loss resulted in a pre-tax charge of $2.4 million, or a diluted EPS impact of 5 cents.

Net income for the second quarter of 2011 was $50.7 million, or $1.59 per diluted share, compared to $46.5 million, or $1.46 per diluted share, in the second quarter of 2010.

Results for the six months ended June 30, 2011

Revenue for the first six months of 2011 was $1.08 billion, up 23.3% from the prior year period. The growth in revenue was the result of new restaurants not in the comparable base and an 11.1% increase in comparable restaurant sales. Comparable restaurant sales growth was primarily driven by increased traffic during the first six months of 2011.

During the first six months of the year, Chipotle opened 51 new restaurants, bringing the total restaurant count to 1,131.

Restaurant level operating margin was 25.5% for the first six months, a decrease of 100 basis points from the prior year period. The decrease was primarily driven by increased food costs partially offset by the impact of leverage from comparable restaurant sales growth.

G&A costs for the first six months of 2011 were 6.9% of revenue, up 50 basis points from the prior year period. The increase as a percent of revenue was primarily driven by an increase in non-cash stock-based compensation.

Net income for the first six months of 2011 was $97.0 million, or $3.06 per diluted share, compared to $84.3 million, or $2.65 per diluted share, in the first six months of 2010.

“We’re pleased that our comps and new restaurant sales have performed well, which is a reflection of the experience our customers enjoy when they visit Chipotle, and which our teams and our people culture are responsible for delivering. While we’re working hard to tackle the challenges that arose during this quarter, we’re confident that the stronger our people culture becomes, the better customer experience we will deliver, which will lead to more loyal customers, even stronger sales trends, and better financial results” commented Co-CEO Monty Moran.

Outlook

For 2011, management expects the following:

  • 135-145 new restaurant openings
  • High single to low double digit comparable restaurant sales growth for the full year
  • An effective tax rate of approximately 38.2%

Steve Ells, Founder, Chairman and Co-Chief Executive Officer, 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 raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere. Through our vision of Food With Integrity, Chipotle is seeking better food not only from using fresh ingredients, but ingredients that are sustainably grown and naturally raised with respect for the animals, the land, and the farmers who produce the food. Chipotle opened its first restaurant in 1993 and currently operates over 1,100 restaurants. For more information, visit chipotle.com.