CHIPOTLE ANNOUNCES SECOND QUARTER 2023 RESULTS

RECORD QUARTERLY SALES AND EARNINGS PER SHARE AS COMPARABLE RESTAURANT SALES INCREASE 7.4% AND MARGINS EXPAND

NEWPORT BEACH, Calif., July 26, 2023 /PRNewswire/ -- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its second quarter ended June 30, 2023.

Second quarter highlights, year over year:

• Total revenue increased 13.6% to $2.5 billion
• Comparable restaurant sales increased 7.4%
• In-restaurant sales increased 15.8%, while digital sales represented 38.0% of food and beverage revenue
• Operating margin was 17.2%, an increase from 15.3%
• Restaurant level operating margin was 27.5% ¹, an increase of 230 basis points
• Diluted earnings per share was $12.32, a 33.2% increase from $9.25. Excluding a $0.33 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs and corporate restructuring, adjusted diluted earnings per share was $12.65, a 36.0% increase from $9.30 ¹
• Opened 47 new restaurants with 40 locations including a Chipotlane

"Chipotle's second quarter results demonstrate our ability to drive strong performance by focusing on exceptional food and exceptional people. Additionally, our investment in our employees, technology, and innovation in our restaurants along with expanding access and convenience in North America and laying the groundwork for international growth, set us up for long term success." said Brian Niccol, Chairman and CEO, Chipotle.

Results for the three months ended June 30, 2023:

Total revenue in the second quarter was $2.5 billion, an increase of 13.6% compared to the second quarter of 2022. The increase in total revenue was driven by a 7.4% increase in comparable restaurant sales and new restaurant openings. In-restaurant sales in the second quarter increased 15.8%, compared to the second quarter of 2022, while digital sales represented 38.0% of total food and beverage revenue.

We opened 47 new restaurants during the second quarter with 40 locations including a Chipotlane. These formats continue to perform well and are helping enhance guest access and convenience, as well as increase new restaurant sales, margins, and returns.

Food, beverage and packaging costs in the second quarter were 29.4% of total revenue, a decrease of about 100 basis points compared to the second quarter of 2022. This decrease results from the benefit of menu price increases taken in the prior year and lower avocado prices, which were partially offset by inflation across several food costs, primarily beef, tortillas, dairy, salsa, beans and rice.

Restaurant level operating margin in the second quarter was 27.5% compared to 25.2% in the second quarter of 2022. The improvement was primarily due to the benefit of sales leverage and, to a lesser extent, lower avocado prices. These decreases were partially offset by higher inflation across several food costs, and to a lesser extent, wage inflation.

General and administrative expenses for the second quarter were $156.5 million on a GAAP basis, or $153.0 on a non-GAAP basis, excluding $3.5 million of corporate restructuring costs related to the May 2023 optimization of our organizational structure. GAAP and non-GAAP general and administrative expenses for the second quarter also include $118.8 million of underlying general and administrative expenses, $29.2 million of non-cash stock compensation, and $4.6 million of higher performance-based accruals and payroll taxes on equity vesting and exercises.

The effective income tax rate for the second quarter was 23.8% compared to 25.3% in the second quarter of 2022. The decrease in the effective income tax rate was primarily due to an increase in tax benefits related to option exercises and equity vesting.

Net income for the second quarter was $341.8 million, or $12.32 per diluted share, compared to $259.9 million, or $9.25 per diluted share, in the second quarter of 2022. In the second quarter of 2023, excluding the $0.33 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs and corporate restructuring, adjusted diluted earnings per share was $12.65.

During the second quarter, our Board of Directors approved the investment of up to an additional $100 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, $294.7 million was available as of June 30, 2023. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased $87.6 million of stock at an average price per share of $1,937.35 during the second quarter.

More information will be available in our Quarterly Report on Form 10-Q, which will be filed with the SEC by the end of July.

Outlook

For 2023, management is anticipating the following:

• Third quarter comparable restaurant sales growth in the low to mid-single digit range
• Full year comparable restaurant sales growth in the mid to high-single digit range
• 255 to 285 new restaurant openings (including 10 to 15 relocations to add a Chipotlane), which assumes utility, construction, permit and material supply delays do not worsen
• An estimated underlying effective full year tax rate between 25% and 27% before discrete items

Definitions

The following definitions apply to these terms as used throughout this release:

• Comparable restaurant sales, or sales comps, and comparable restaurant transactions, represent the change in period-over-period total revenue or transactions for restaurants in operation for at least 13 full calendar months.
• Average restaurant sales refer to the average trailing 12-month food and beverage revenue for restaurants in operation for at least 12 full calendar months.
• Restaurant level operating margin represents total revenue less direct restaurant operating costs, expressed as a percent of total revenue.
• Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators. Digital sales include revenue deferrals associated with Chipotle Rewards.
• In-restaurant sales represent food and beverage revenue generated on-premise. In-restaurant sales includes revenue deferrals associated with Chipotle Rewards.

Conference Call Details

Chipotle will host a conference call on Wednesday, July 26, 2023, at 4:30 PM Eastern time to discuss second quarter 2023 financial results as well as provide a business update for the third quarter 2023.

The conference call can be accessed live over the phone by dialing 1-888-317-6003, or for international callers by dialing 1-412-317-6061, and use code: 7029474. The call will be webcast live from the company's website on the investor relations page at ir.chipotle.com/events. An archived webcast will be available approximately one hour after the end of the call.

About Chipotle

Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better world by serving responsibly sourced, classically-cooked, real food with wholesome ingredients without artificial colors, flavors or preservatives. Chipotle had over 3,250 restaurants as of June 30, 2023, in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants in North America and Europe. Chipotle is ranked on the Fortune 500 and is recognized on the 2023 list for Fortune's Most Admired Companies and Time Magazine's Most Influential Companies. With over 110,000 employees passionate about providing a great guest experience, Chipotle is a longtime leader and innovator in the food industry. Chipotle is committed to making its food more accessible to everyone while continuing to be a brand with a demonstrated purpose as it leads the way in digital, technology and sustainable business practices. For more information or to place an order online, visit WWW.CHIPOTLE.COM.

Forward-Looking Statements

Certain statements in this press release and in the July 26, 2023, conference call are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements under "Outlook" about our anticipated third quarter and full year 2023 comparable restaurant sales growth, goals for number of new restaurant openings, and estimated underlying effective full year tax rate, as well as statements about expected restaurants with Chipotlanes and rate of expansion, future labor costs, future general and administrative and other costs, future estimated tax rates and future long-term prospects. We use words such as "anticipate", "believe", "could", "should", "may", "approximately", "estimate", "expect", "intend", "project", "target", and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on currently available operating, financial and competitive information available to us as of the date of this release and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements, including but not limited to: increasing wage inflation and the competitive labor market, which impacts our ability to attract and retain qualified employees and has resulted in occasional staffing shortages; the impact of any union organizing efforts and our responses to such efforts; increasing supply costs (including beef, tortillas, dairy, salsa, beans and rice); risks of food safety incidents and food-borne illnesses; risks associated with our reliance on certain information technology systems and potential material failures or interruptions; privacy and cyber security risks, including risk of breaches, unauthorized access, theft, modification or destruction of guest or employee personal or confidential information stored on our network or the network of third party providers; the impact of competition, including from sources outside the restaurant industry; the financial impact of increasing our average hourly wages; the impact of federal, state or local government regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the availability of suitable new restaurant sites and the availability of construction materials and contractors; increases in ingredient and other operating costs due to inflation, global conflicts, climate change, our Food with Integrity philosophy, tariffs or trade restrictions and supply shortages; the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in consumers' perceptions of our brand, including as a result of actual or rumored food safety concerns or other negative publicity, decreased consumer spending (including as a result of higher inflation, mass layoffs, fear of possible recession and higher energy prices), or the inability to increase menu prices or realize the benefits of menu price increases; risks associated with our digital business, including risks arising from our reliance on third party delivery services; risks relating to litigation, including possible governmental actions and potentially class action litigation related to food safety incidents, cybersecurity incidents, employment or privacy laws, advertising claims or other matters; and other risk factors described from time to time in our SEC reports, including our annual report on Form 10-K and quarterly reports on Form 10-Q, all of which are available on the investor relations page of our website at ir.Chipotle.com.

¹ Restaurant level operating margin, adjusted diluted earnings per share, adjusted net income, non-GAAP general and administrative expenses, and non-GAAP effective income tax rate are non-GAAP financial measures. Reconciliations to GAAP measures and further information are set forth in the table at the end of this press release.