Chipotle Mexican Grill, Inc. (CMG Quick QuoteCMG – Free Report) released third-quarter 2023 results, with earnings and revenues beating the Zacks Consensus Estimate. The top and bottom lines increased on a year-over-year basis. Earnings surpassed the consensus estimate for the third consecutive quarter.
Following the earnings release, shares of the company rose 3.8% during the after-hours trading session on Oct 26.
Q3 Earnings & Revenue Discussion
In the quarter under review, Chipotle reported adjusted earnings per share (EPS) of $11.36, outpacing the Zacks Consensus Estimate of $10.46. The bottom line improved 19.5% from $9.51 in the year-ago quarter.
Quarterly revenues of $2,471.9 million surpassed the consensus mark of $2,469 million. The top line jumped 11.3% on a year-over-year basis on the back of strong comparable restaurant sales growth and new restaurant openings. In the reported quarter, Chipotle opened 62 new restaurants with 54 locations including a Chipotlane.
Digital sales contributed 36.6% to total food and beverage revenues.
During the third quarter, comparable restaurant sales grew 5% year over year compared with 7.4% in the previous quarter. Our estimate for the metric was pegged at 3.6%.
Chipotle Mexican Grill, Inc. Price, Consensus and EPS Surprise
Costs, Operating Highlights & Net Income
During third-quarter 2023, food, beverage and packaging costs, as a percentage of revenues, came in at 29.7%, down 10 basis points year over year. The cost improvement was backed by menu price rises overshadowed by inflation across several food costs, most notably beef and queso. We suggested the metric to be 30%.
During the quarter under discussion, the restaurant-level operating margin reached 26.3%, up from 25.3% a year ago. The uptick was primarily driven by sales leverage. However, this was partially offset by higher food costs and wage inflation. Our predicted the metric to be 25.1%.
Adjusted net income in the reported quarter amounted to $314.3 million, up 18.2% from the prior-year quarter.
Balance Sheet
As of Sep 30, 2023, the company reported cash and cash equivalents of $602.3 million compared with $504.9 million as of Jun 30, 2023.
As of Sep 30, 2023, inventory totaled $40.2 million compared with $36 million as of Jun 30, 2023. Goodwill (as a percentage of total assets) reached 0.3% at the end of the second quarter of 2023.
During the third quarter, CMG repurchased $226.3 million worth of stock at an average price of $1,913.98.
Outlook
For fourth-quarter 2023, management expects comps growth in the mid to high-single-digit range.
CMG anticipates to open 255-285 restaurants in 2023. It expects a 25-27% tax rate for 2023. For 2024, it forecasts 285-315 restaurant openings.