uploads///

What Drove Chipotle’s Earnings Margin in 4Q17?

By

Dec. 4 2020, Updated 10:53 a.m. ET

EBIT margins

Chipotle Mexican Grill (CMG) posted EBIT (earnings before interest and tax) of $60.03 million for 4Q17, which represents an EBIT margin of 5.4%. 

The expansion was driven by lower food, beverage and packaging costs, other operating costs, and G&A (general and administrative) expenses. Food, beverage, and packaging costs declined from 35.3% of total revenue in 4Q16 to 34.2% due to an increase in menu prices, a fall in avocado prices, and better management of paper and packaging inventories. Other operating costs declined from 16.3% to 15.8% due to lower marketing and promotional expenses, which was partially offset by increased maintenance and repair expenditure. G&A expenses fell from 6.3% to 5.2%.

Article continues below advertisement

However, the increase in occupancy costs offset some of the expansion in EBIT margins. The occupancy cost increased from 7.4% in 4Q16 to 7.6% due to inflation from renewals and higher average rents from new restaurants. Despite wage inflation, the company’s labor costs remained flat at 27.5% due to improved labor efficiencies, lower insurance and benefit costs, and leverage from increased menu prices.

Peer comparisons

For the same period, analysts expect Shake Shack (SHAK) and The Cheesecake Factory (CAKE) to post EBIT margins of 4.1% and 5.8%, respectively.

Outlook

For 2018, analysts expect Chipotle to post an EBIT margin of 7.8%, compared to 6.7% in 2017. The expansion is expected to be driven by lower food, beverage and packaging costs due to increased menu prices, and lower G&A expenses.

Next in this series, we’ll look at Chipotle’s 4Q17 EPS.

Advertisement

More From Market Realist

    • CONNECT with Market Realist
    • Link to Facebook
    • Link to Twitter
    • Link to Instagram
    • Link to Email Subscribe
    Market Realist Logo
    Do Not Sell My Personal Information

    © Copyright 2021 Market Realist. Market Realist is a registered trademark. All Rights Reserved. People may receive compensation for some links to products and services on this website. Offers may be subject to change without notice.