Chipotle Mexican Grill Inc. (CMG, Financial) has around 1,681 outlets and has been there around 20 years. It has been known for profitable growth. Over these years, CMG held to its strong brand reputation. 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.
Second-quarter report analysis
Revenue increased 28.6% to $1.05 billion. Comparable restaurant sales increased 17.3%. Net income was $110.3 million, an increase of 25.5%. Diluted earnings per share were $3.50, an increase of 24.1%. (All these figures are compared to second quarter of 2013).
Revenue for the quarter was $1.05 billion, up 28.6% from the second quarter of 2013. The growth in revenue was driven by a 17.3% increase in comparable restaurant sales and from new restaurants not in the comparable base. Comparable restaurant sales growth was driven primarily by increased traffic and to a lesser extent from an increase in average check, which includes the benefit of the nationwide menu price increases that were fully rolled out by the end of the quarter.
Food costs were 34.6% of revenue, an increase of 150 basis points, driven by increased prices for beef, avocados and dairy, partially offset by the menu price increase and lower tomatillo prices.
“We’re pleased that we continued to drive excellent results in the second quarter, including one of our strongest sales comps as a public company. These extraordinary results are made possible by our special food culture, innovative people culture, and strong business model that are not only creating significant shareholder value but also helping us realize our vision to change the way people think about and eat fast food,” said Steve Ells, founder, chairman and co-CEO of Chipotle.
Growing trend
A company grows by constant innovation. Currently, CMG is focused on constant innovation and rapid expansion. It is already bringing in more stores. In the first half of 2014, CMG rolled out 89 more stores. By the end of 2018, CMG sales may reach $6.5 billion. The company is already planning to open around 195 restaurants in 2014.
Chipotle’s international expansion is evolving gradually. The process will definitely speed up in the coming few years. It is already planning a strategy to expand rapidly in Europe. If it opens few of its restaurants in Asia, it will fuel CMG’s growth.
Chipotle will work with more than 45 local farms around the country to provide bell peppers, cilantro, red onions, jalapeno peppers, oregano, romaine lettuce and tomatoes for its restaurants when seasonally available. In select cities, the company will also source avocados and lemons from local growers. Chipotle’s use of locally grown produce is rooted in its belief that produce from local growers arrives at its restaurants closer to harvest, resulting in fresher, more delicious food. (Source: Company Website)
Final thoughts
Chipotle has always been known for impressive growth trends. It operates in the fast food industry. More people are now aware of obesity. More and more people are changing preferences towards healthy foods, and CMG, being aware of this, is busy bringing a healthy menu for its investors. It is known to have promoted antibiotic free meat.
“We are changing the way people think about and eat fast food,” said Steve Ells, founder, chairman and co-CEO of Chipotle. “That means pushing ourselves to find the best quality ingredients – ingredients that have traditionally been available only in high-end restaurants and specialty food markets – and making them available in a way that is accessible to really mainstream customers.”
