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Unit Growth Drove Chipotle’s Revenue in 4Q16

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Revenue sources

Chipotle Mexican Grill (CMG) owns and operates all of its restaurants. Sales from these restaurants form Chipotle’s revenue. In 4Q16, the company posted revenue of $1.03 billion, a growth of 3.5% from $1 billion in 4Q15. Analysts expected its 4Q16 revenue to be $1.0 billion.

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Factors affecting Chipotle’s revenue

Chipotle’s 4Q16 revenue growth was driven by the addition of 240 new restaurants in the last 12 months. However, negative SSSG (same-store sales growth) of 4.8% has offset some of the revenue growth.

After the E. coli outbreak in October 2015, Chipotle’s customers became skeptical about the quality of the food being served in its restaurants. It led to a fall in its traffic and SSSG. However, the company has been focusing on streamlining its hiring process, training, and aligning its restauranteur program with customer preferences to improve its SSSG. These efforts have led to improvement in its SSSG. The company has posted SSSG of -4.8% compared to -14.6% in 4Q15.

Peer comparisons

In 4Q16, analysts are expecting peers Panera Bread (PNRA) and Shake Shack (SHAK) to post revenue growth of 5.3% and 38.1%, respectively.

Outlook

In 2017, analysts are expecting the company to post revenue of $4.6 billion, which represents a growth of 17.4% from $3.9 billion in 2016. The revenue growth is expected to be driven by positive SSSG and the addition of new restaurants. Chipotle’s management expects to open 195–210 new restaurants in 2017.

Next, we’ll look at Chipotle’s 4Q16 same-store sales growth.

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