DENVER - (BUSINESS WIRE) - Jul. 21, 2016 - Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its second quarter ended June 30, 2016.
Overview for the three months ended June 30, 2016 as compared to the three months ended June 30, 2015:
Overview for the six months ended June 30, 2016 as compared to the six months ended June 30, 2015:
"We returned to profitability, and saw a modest improvement in comp sales trends in the second quarter. Our most recent marketing efforts, led by our Chiptopia frequency program, are off to a nice start in the third quarter, as customers are embracing the program and nearly 30% of all transactions are engaged in Chiptopia. Our entire company is focused on restoring customer trust and re-establishing customer frequency, and rewarding our most loyal customers for visiting more often through Chiptopia is one way to do just that. While it has only been a few weeks since Chiptopia launched, we are pleased to see that July sales comp trends have already improved by 200 to 300 basis points, and transaction comp trends have improved by an even greater amount," said Steve Ells, founder, chairman and co-CEO of Chipotle.
Revenue for the quarter was $998.4 million, down 16.6% from the second quarter of 2015. The decrease in revenue was driven by a 23.6% decrease in comparable restaurant sales, partially offset by sales from new restaurant openings. Comparable restaurant sales declined primarily as a result of a decrease in the number of transactions in our restaurants, and to a lesser extent from a decline in average check.
We opened 58 new restaurants during the quarter, bringing the total restaurant count to 2,124.
Food costs were 34.2% of revenue, an increase of 110 basis points as compared to the second quarter of 2015. The increase was driven by increased costs at our suppliers related to new food safety procedures and food waste costs. Increases in food costs were partially offset by the benefit of menu price increases implemented in select restaurants in the second half of 2015.
Restaurant level operating margin was 15.5% in the quarter, a decrease from 28.0% in the second quarter of 2015. The decrease was primarily driven by unfavorable sales leverage, and to a lesser extent by higher marketing and promotional costs.
General and administrative expenses were 7.1% of revenue for the second quarter of 2016, an increase of 120 basis points over the second quarter of 2015 as a result of sales deleverage. In dollar terms, general and administrative expenses were flat compared to the second quarter of 2015, as increased wages as we grew and higher legal expenses, were offset by lower non-cash stock based compensation expense and related employee taxes.
Net income for the second quarter of 2016 was $25.6 million, or $0.87 per diluted share, compared to net income of $140.2 million, or $4.45 per diluted share, in the second quarter of 2015.
Revenue for the first six months of 2016 was $1.83 billion, down 19.9% from the first six months of 2015. The decrease in revenue was driven by a 26.5% decrease in comparable restaurant sales, partially offset by sales from new restaurant openings. Comparable restaurant sales declined primarily as a result of a decrease in the number of transactions in our restaurants, and to a lesser extent from a decline in average check.
We opened 114 new restaurants during the first six months of 2016, net of two relocations, bringing the total restaurant count to 2,124.
Food costs were 34.7% of revenue, an increase of 120 basis points as compared to the first six months of 2015. The increase was driven by increased costs at our suppliers related to new food safety procedures and food waste costs. Increases in food costs were partially offset by the benefit of small and targeted menu price increases implemented in the second half of 2015, and relief in beef prices.
Restaurant level operating margin was 11.6% in the first half of 2016, a decrease from 27.7% in the first six months of 2015. The decrease was primarily driven by unfavorable sales leverage, and to a lesser extent by higher marketing and promotional costs.
General and administrative expenses were 7.2% of revenue for the first six months of 2016, an increase of 140 basis points over the first six months of 2015 as a result of sales deleverage. In dollar terms, general and administrative costs were lower than last year, due to lower non-cash stock based compensation expense and related employee taxes, offset by increased wages as we grew and higher legal expense.
Net loss for the first six months of 2016 was $0.8 million, or $0.03 loss per diluted share, compared to net income of $262.8 million, or $8.34 per diluted share, for the six months ended June 30, 2015.
"The best thing that we can do for our business is to earn customers' trust and loyalty by consistently providing a terrific restaurant experience with safe, delicious food and excellent service. We will do that by continuing to develop great leaders who can build restaurant teams of empowered top performers that can successfully deliver on this goal," said Monty Moran, co-CEO.
For 2016, management expects the following:
The following definitions apply to these terms as used throughout this release:
Comparable restaurant sales, or sales comps, represent the change in period-over-period sales for restaurants in operation for at least 13 full calendar months.
Average restaurant sales refers to the average trailing 12-month sales for restaurants in operation for at least 12 full calendar months.
Restaurant level operating margin represents total revenue less restaurant operating costs, expressed as a percent of total revenue.
Chipotle will host a conference call to discuss the second quarter 2016 financial results on Thursday, July 21, 2016 at 4:30 PM Eastern time.
The conference call can be accessed live over the phone by dialing 1-800-316-8317 or for international callers by dialing 1-719-325-2126. A replay will be available two hours after the call and can be accessed by dialing 1-877-870-5176 or 1-858-384-5517 for international callers; the password is 6974351. The replay will be available until July 28, 2016. The call will be webcast live from the company's website at chipotle.com under the investor relations section. An archived webcast will be available approximately one hour after the end of the call.
Steve Ells, founder, chairman and co-CEO, started Chipotle with the idea that food served fast did not have to be a typical fast food experience. Today, Chipotle continues to offer a focused menu of burritos, tacos, burrito bowls (a burrito without the tortilla) and salads made from fresh, high-quality ingredients, prepared using classic cooking methods and served in a distinctive atmosphere. Through our vision of Food With Integrity, Chipotle is seeking better food from using ingredients that are not only fresh, but that--where possible--are sustainably grown and raised responsibly with respect for the animals, the land, and the farmers who produce the food. In order to achieve this vision, we focus on building a special people culture that is centered on creating teams of top performers empowered to achieve high standards. This people culture not only leads to a better dining experience for our customers, it also allows us to develop future leaders from within. Chipotle opened with a single restaurant in 1993 and operates more than 2,100 restaurants, including 27 Chipotle restaurants outside the US and 15 ShopHouse Southeast Asian Kitchen restaurants, and is an investor in an entity that owns and operates four Pizzeria Locale restaurants. For more information, visit Chipotle.com.
Certain statements in this press release, including statements regarding customer trust and frequency and our Chiptopia rewards program, as well as statements under the heading "Outlook" of our expected number of new restaurant openings and effective tax rates in 2016, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as "anticipate", "believe", "could", "should", "estimate", "expect", "intend", "may", "predict", "project", "target", and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in consumers' acceptance of and enthusiasm for our brand, including as a result of recent food-borne illness incidents, the impact of competition, decreased overall consumer spending, or our possible inability to increase menu prices or realize the benefits of menu price increases; the risk of food-borne illnesses and other health concerns about our food or dining out generally; factors that could affect our ability to achieve and manage our planned expansion, such as the availability of a sufficient number of suitable new restaurant sites and the availability of qualified employees; the performance of new restaurants and their impact on existing restaurant sales; increases in the cost of food ingredients and other key supplies or higher food costs due to new supply chain protocols; the potential for increased labor costs or difficulty retaining qualified employees, including as a result of market pressures, enhanced food safety procedures in our restaurants, or new regulatory requirements; risks relating to our expansion into new markets; the impact of federal, state or local government regulations relating to our employees, our restaurant design, or the sale of food or alcoholic beverages; risks associated with our Food With Integrity strategy, including supply shortages and potential liabilities from advertising claims and other marketing activities related to Food With Integrity; security risks associated with the acceptance of electronic payment cards or electronic storage and processing of confidential customer or employee information; risks relating to litigation, including possible governmental actions related to food-borne illness incidents, as well as class action litigation regarding employment laws, advertising claims or other matters; risks relating to our insurance coverage and self-insurance; our dependence on key personnel; risks related to our marketing and advertising strategies, including risks related to our Chiptopia rewards program and other promotional activities; risks regarding our ability to protect our brand and reputation; risks associated with our ability to effectively manage our growth; and other risk factors described from time to time in our SEC reports, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q, all of which are available on the investor relations page of our website at ir.Chipotle.com.
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SOURCE Chipotle Mexican Grill, Inc.
Investor Relations
Chipotle Mexican Grill, Inc.
303-605-1042
Chipotle continues to offer a focused menu of burritos, tacos, burrito bowls and salads made from fresh, high-quality raw ingredients, prepared using classic cooking methods and served in a distinctive atmosphere.