Must-know: Why Chipotle continues to beat estimates

Must-know: Why Chipotle continues to beat estimates (Part 1 of 5)

Must-know: Why Chipotle continues to beat estimates

Chipotle Mexican Grill

On January 30, 2014, Chipotle Mexican Grill (CMG), the largest player in the fast-casual restaurant industry, reported its 4Q13 earnings and summarized its performance for the fiscal year. Chipotle saw prices move 10.5% on January 31 after the previous day’s earnings call, as it continued to serve positive results in addition to delicious burritos. Chipotle experienced a similar 13.5% rally in price last October, after beating estimates the previous quarter.

Chipotle stockprice and S&amp;P 500Enlarge Graph

Leading up to earnings call

Drops experienced in the week leading up to the earnings call were generally not indicative of sentiments about the company’s performance announcement. Rather, the movement reflected sell-offs from the overall market.

Chipotle’s rally can be attributed to a few factors: comparable restaurant sales growth, increased throughput, and new locations.

The company saw positive results for same-quarter sales revenue, with an increase of 20.7% and $844 million, while posting an increase of 17.7% and $3.21 billion for 2013. Growth was attributed to same-store sales growth, new restaurant openings, and throughput. We’ll take a closer look at these growth drivers in the next parts of this series.

The Realist Discussions

  • # drocto

    That regression line should EXCLUDE CMG. When comparing to competitors you exclude the company in question. That regression line would be much flatter without CMG.

  • # drocto

    Taco Bell is a distant competitor. Chipotle’s real competitors are other fast casual chains that are growing. The thing that sets Chipotle apart are the food, the format, and the service forming value at the price point. Other companies will copy the format and work to develop similar service levels whether with Mexican food (sort of) or other foods.

    The threat to Chipotle’s store volumes and margins comes when other fast casual concepts with a compelling menu and value show up in the same locations as Chipotle. By being a first mover in fast casual they’ve largely avoided this so far. But it will come – the margins and growth are bringing in competitors.