Chipotle Mexican Grill Inc. Reports Disappointing 4th Quarter Earnings
Chipotle Mexican Grill Inc. (NYSE:CMG) released its fourth-quarter earnings report on Wednesday, disappointing both analysts and investors alike. The burrito chain reported total revenue of $2.2bn, an increase of 11.2% compared to the same period in 2021. Comparable restaurant sales increased 5.6% year-over-year, while earnings per share were slightly lower than expected at $8.29 per share.
Excluding certain legal expenses, corporate restructuring costs and other items, Chipotle earned $8.29 per share, compared to $5.58 a share in the prior-year quarter. Per a survey conducted by FactSet, analysts anticipated adjusted earnings per share of $8.91, in addition to revenue of $2.23 billion. It was anticipated that same-store sales would increase by 6.9%.
Chipotle's same-store sales experienced an 8% increase over the entire year. Revenues rose to $8.6 billion, a 14.4% increase, while net income came in at $899 million, equating to $32.04 per share, compared to $652.9 million and $22.90 per share from the prior year. In-restaurant sales increased 26.4% for the year ended December 31, 2022, as compared to the year ended December 31, 2021, while digital sales represented 39.4% of total food and beverage revenue.
Restaurant level operating margin was up 24% from this time last year—20.2%. Sales leverage was the main factor that led to the improvement, while lower delivery fees resulting from fewer delivery transactions had a smaller effect. This progress was partly negated by higher food costs and wage inflation. Food, beverage and packaging costs in the fourth quarter were 29% of total revenue, a decrease of 230 basis points compared to the fourth quarter of 2021.
Chipotle Mexican Grill’s shares fell 5% in after-hours trading after the burrito restaurant chain reported fourth-quarter adjusted earnings, revenue, and same-store sales that fell short of Wall Street’s expectations.
Last year, the company opened 236 additional restaurants, bringing the total number of restaurants they operate up to 3,187. Many of the new restaurants featured Chipotlanes, a drive-thru lane designated solely for orders placed on the mobile app.
Investors are willing to give Chipotle credit for the latest growth, but the fast-casual restaurant chain's valuation is still quite high.
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1. “Chipotle reports 11.2% revenue increase in Q4 2022” Verdict Foodservice, 8 Feb. 2023, https://www.verdictfoodservice.com/news/chipotle-reports-revenue-increase-q4/
2. “Chipotle stock loses its spice as 4Q earnings disappoint” Proactive Investors USA, 8 Feb. 2023, https://www.proactiveinvestors.com/companies/news/1005607/chipotle-stock-loses-its-spice-as-4q-earnings-disappoint-1005607.html
3. “Chipotle Mexican Grill Misses Expectations for Earnings, Revenue and Same-Store Sales” NBC 6 South Florida, 7 Feb. 2023, https://www.nbcmiami.com/news/business/money-report/chipotle-mexican-grill-misses-expectations-for-earnings-revenue-and-same-store-sales/2968210/
4. “Chipotle stock falls after ‘tightening' consumer spending leads to second earnings miss in 5 years” MarketWatch, 7 Feb. 2023, https://www.marketwatch.com/story/chipotle-stock-falls-after-tightening-consumer-spending-leads-to-second-earnings-miss-in-five-years-11675805754
5. “Chipotle to test a robotic makeline and new grills” Restaurant Business Online, 8 Feb. 2023, https://www.restaurantbusinessonline.com/operations/chipotle-test-robotic-makeline-new-grills
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7. “Chipotle Slumps After Disappointing on Sales, Key Profit Margin” Bloomberg, 7 Feb. 2023, https://www.bloomberg.com/news/articles/2023-02-07/chipotle-slumps-as-rising-expenses-erode-profitability
8. “Chipotle's Q4 2022 earnings preview: Here's what to expect” Yahoo News, 7 Feb. 2023, https://news.yahoo.com/chipotles-q4-2022-earnings-preview-heres-what-to-expect-150339797.html
9. “Chipotle Stock Falls After Earnings Disappointed” Barron's, 8 Feb. 2023, https://www.barrons.com/articles/chipotle-earnings-stock-price-51675811556
10. “Chipotle Stock: Time to Sell Some Shares?” The Motley Fool, 8 Feb. 2023, https://www.fool.com/investing/2023/02/08/chipotle-stock-time-to-sell-some-shares
11. “Chipotle's Valuation Does Not” GuruFocus.com, 8 Feb. 2023, https://www.gurufocus.com/news/1945873/chipotles-valuation-does-not-make-sense
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