Same-store sales growth in the double digits
Chipotle Mexican Grill (CMG) had a 16.1% same-store sales growth in the fourth quarter. The company reported double-digit same-store sales in the previous three quarters as well at 19.8% in 3Q, 17.3% in 2Q14, and 13.4% in 1Q14.
Same-store sales increased in the third quarter because of an increase in traffic (or customer visits) and an increase in average check of 8.3%. Average check increased due to an increase in the menu price of 6.3% and Chipotle’s catering business. Market Realist discussed the company’s price increase in the 2Q earnings overview.
Chipotle Mexican Grill’s same-store sales growth contributed towards revenue growth of 27.8% to $4.1 billion, on a full-year basis, ending on December 31, 2013.
Why look at same-store sales?
Same-store sales, as the name suggests, refers to the sales at existing restaurant locations, and companies measure it as a percentage growth or decline from the previous comparable period. Same-store sales increase when more customers visit the restaurant (traffic), or customers spend more per order (ticket or average check) or a combination of both.
An increase in traffic and ticket increases transaction and is a positive indicator for restaurants, such as those that make up the ETF Consumer Discretionary Select Sector SPDR Fund (XLY), which includes McDonald’s (MCD), Yum! Brands (YUM), Chipotle Mexican Grill (CMG), and Starbucks (SBUX). XLY holds ~4% of McDonald’s stock. Besides these two metrics, restaurant sales also benefit from new restaurant units. We’ll look at unit growth for Chipotle Mexican Grill in the next part of this series.