Restaurant chain Chipotle Mexican Grill Inc. (CMG, Financial) reported its third-quarter results after the market closed on Oct. 24.
The Denver-based company posted adjusted earnings per share of $1.33 for the quarter, missing estimates of $1.63. Revenue of $1.13 billion also fell short of expectations of $1.14 billion but increased 8.8% from the prior-year quarter.
Chipotle’s same-store sales increased 1%, shy of the expected 1.2% growth.
Following the announcement, the stock, which had gained 1.2% during the day, fell more than 5% in after-hours trading.
The graph below illustrates the trend in Chipotle’s revenue growth over the past decade.
The Mexican restaurant chain attributed the revenue increase to opening new locations and a slight increase in same-store sales. Chipotle has been attempting to attract customers back after numerous epidemics of food-borne illness in 2015, but a recent norovirus outbreak in Virginia may have set back this progress. The company’s investigation into the incident found management at the restaurant did not follow safety protocols and allowed a sick staff member to work.
Steve Ells, founder, chairman and CEO, said the company is continuing to make progress in improving the guest experience, which includes innovating its digital sales platform, introducing new menu items and marketing the brand.
“Despite several unusual impacts during the quarter, including the impact of hurricanes, we maintained our focus and saw some encouraging signs,” he said. “Our leadership remains focused on setting the foundation for future growth, and we are confident in our teams’ ability to deliver against those plans.”
In September, Chipotle introduced queso and cut chorizo from its menu. The queso, which is made from all-natural ingredients, failed to impress customers and has been widely criticized on social media. Nonetheless, the chain is standing behind its product.
For full fiscal 2017, the company projects same-store sales to increase around 6.5%. Previous forecasts called for growth in the high single digits. In addition, it trimmed back the number of new restaurant openings to the lower end of its previously disclosed range of 195 to 210 locations. In 2018, Chipotle expects to open 130 to 150 new restaurants.
Out of the nine gurus invested in Chipotle, Bill Ackman (Trades, Portfolio) has the largest position with 10.11% of outstanding shares. Frank Sands (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio), Jim Simons (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Ray Dalio (Trades, Portfolio), John Hussman (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) are also shareholders.
The company has a market cap of $9.24 billion; the stock closed at $324.30 on Tuesday with a price-earnings (P/E) ratio of 68.5, a price-book (P/B) ratio of 6.39 and a price-sales (P/S) ratio of 2.19. According to GuruFocus data, the stock has lost 15% year to date.
Disclosure: I do not own any stocks mentioned.
