Bill Ackman Comments on Chipotle Mexican Grill

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Aug 23, 2022
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Chipotle Mexican Grill (

CMG, Financial) (“CMG”)

Chipotle continued its impressive performance in 2022 driven by the ongoing recovery of in-restaurant sales, price increases to cover cost inflation, and successful menu innovation including pollo asado. During the second quarter, Chipotle continued to lead the restaurant industry in growth for both same-store sales (“SSS”) and new restaurants, with SSS growing 10% year-over-year or 30% on a three-year cumulative basis. On-premise sales grew 36% as consumers resumed pre-pandemic routines, while digital sales declined only 3%, continuing their persistence despite the growth of conventional sales. Chipotle remains on track to grow its store base by approximately 8% this year with a longer-term annual store growth aspiration of nearly 10% once current headwinds around construction, permitting, and supplies ease.

We believe Chipotle is one of the best-positioned consumer companies for the current inflationary world. Given significant inflation in food and labor costs, management has planned a menu price increase of approximately 4% for August following a similarly-sized price increase in March. The company has tremendous pricing power due to the superb quality of its food which is priced at a discount to many competitors with inferior offerings, marketing focused on food quality and freshness rather than cost, and a customer base that over-indexes to higher-income consumers, some of whom are trading down from pricier alternatives.

Chipotle’s economic model remains firmly intact, with restaurant-level margins in excess of 25% in the second quarter, up 0.8% year-over-year, and a consistent level of profitability expected for the current quarter. The company is debt-free and generates nearly all its sales in the U.S., insulating its earnings from the foreign currency headwinds facing many other large consumer companies.

To accelerate Chipotle’s growth beyond the company’s continued strong results, management is focused on improving throughput for in-store orders, and increasing order accuracy and timeliness for digital orders. While Chipotle’s restaurants are staffed above 2019 levels, many current employees haven’t experienced optimal operations given pandemic-related disruptions and the high rate of employee turnover endemic to the restaurant industry. Management has rolled out a new labor deployment tool to develop staffing models and is instituting an operational initiative focused on excellent execution of the basics, the latter of which started to bear fruit in 2019 before it was interrupted by the pandemic. We continue to be impressed by Chipotle management’s continuous improvement initiatives, drive to create a superb customer experience and shareholder value creation.


Bill Ackman (Trades, Portfolio)'s Pershing Square semiannual 2022 letter.

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