Chipotle Mexican Grill (CMG) reported fiscal second quarter earnings results on Wednesday, July 26, after the market close that showed sales rose less than expected, sending the company’s stock down as much as 6.5% in after-hours trading.
Revenue grew 13.6% to $2.5 billion as same-store sales rose 7.4%, slightly lower than analyst estimates for sales to rise 7.67% from a year ago. Operating margins also rose last quarter to 17.2%, up from 15.3% a year ago but slightly lower than analyst estimates for margins closer to 17.55%.
The company did manage to post a bottom-line beat, with adjusted earnings per share coming in at $12.32, more than the $12.25 expected by analysts.
In the third quarter, Chipotle execs expect same-store sales to grow in the low- to mid-single-digit range and 2023 full-year sales to grow in the mid- to high-single-digit range.
In the company’s earnings release, CEO Brian Niccol said the quarter reflected Chipotle’s “ability to drive strong performance by focusing on exceptional food and exceptional people.”
Chipotle stock has gained about 50% so far this year through Wednesday’s close.
In-restaurant sales, as opposed to online orders, also moved higher last quarter, up 14.8% compared to last year while digital sales made up 38% of total food and beverage revenue.
Food, beverage, and packaging costs made up 29.4% of total revenue last quarter, down 100 basis points compared to Q2 2022, in part due to the “benefit of menu price increases taken in the prior year” and lower avocado costs, which offset higher prices for other food items such as beef, tortillas, dairy, salsa, beans, and rice.
Beef and avocados make up 20% and 9% of Chipotle’s food basket, respectively.
Restaurant-level operating margins came in at 27.5%, slightly higher than estimates of 27.17% and up from last year’s second quarter results, at 25.2%.
“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,”…
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