Riding on the back of conscientious 20-30 something consumers in the United States, Chipotle Mexican Grill (CMG, Financial) reported a net income of $122.6 million, or $3.88 per diluted share, in the quarter ended March 31, 2015. This is up from $83.1 million, or $2.64 per diluted share, earned in the first quarter of 2014. Revenue grew 20.4%, year on year, to $1.09 billion in the latest quarter. Analysts had told Thomson Reuter, that they predicted a per share earnings of $3.66 and revenue of $1.11 billion for the fast food franchise.
Number drivers
“We are very proud of our start to 2015, as our average sales volumes reached a record $2.5 million per restaurant. We attribute this success to our unique food culture and people culture, which are the driving forces to create a new fast food model. The quarter was not without its challenges, however, as we suspended one of our primary pork suppliers and are exploring options to increase the supply of pork that meets our high standards. But we remain confident that higher quality, responsibly raised ingredients taste better and will continue to resonate with our customers,” said Steve Ells, founder, chairman and co-CEO of Chipotle.
Rise in new restaurant sales and comparable restaurant sales by 10.4%, the company believes, drove this increase in revenue. The company credits its nationwide menu price increase, implemented in the second quarter of 2014, and to a lesser extent by increased traffic, for the sales boost. But analysts had predicted an 11.8% increase in comparable sales, according to the Consensus Matrix.
Market statistics
Chipotle executives maintain that the company’s growth cycles come in "waves of three" where new customers discover the Mexican grill’s food and philosophy and come back for more. But now that the latest "wave" is on the trough, the executives fear that the company will see a period of struggle, in terms of boosting traffic to the 1,831 restaurants across the country, in the upcoming quarter. Chipotle opened 49 new restaurants in the first quarter.
The brand insists on driving business on its philosophy of keeping ingredients simple – the entire menu has 70 ingredients; and only working with suppliers who have strong environmental and animal-welfare practises in production.
“Our teams of top performers continue to create extraordinary customer experiences in our restaurants, which generates customer loyalty and attracts new customers. We are very pleased with our field leadership’s ability to empower restaurant teams and develop new leaders. This competitive advantage is at the heart of our people culture, and we believe will continue to deliver strong business results throughout 2015,” said Monty Moran, co-CEO of Chipotle.
After-hours trading reacts
While trading on Tuesday saw shares climb 0.81% to $692.52, after-hours trading saw a drastic tumble of 5.39% to $655.20, reacting to the news of earnings and analyst estimates. Shares peaked this year to touch $727.97 in February 2015. The shares have a P/E Ratio of 49.01 and EPS of $14.13.
Analyst recommendations are gridlocked at "Hold" and "Strong buy" with 10 analysts favoring each option, among the 23 polled. Chipotle's shares have gained over 2% this year and seen a mammoth 37% growth in the last 12 months.
