Chipotle Announces Second Quarter 2021 Results
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Chipotle Announces Second Quarter 2021 Results

Comparable Restaurant Sales Accelerate To 31.2%, Resulting In Record Operating Profitability

NEWPORT BEACH, Calif., July 20, 2021 // PRNewswire // - Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its second quarter ended June 30, 2021.

Second quarter highlights, year over year:

  • Revenue increased 38.7% to $1.9 billion
  • Comparable restaurant sales increased 31.2%
  • Digital sales grew 10.5% and accounted for 48.5% of sales
  • Operating margin was 13.0%, an increase from -0.4%
  • Restaurant level operating margin was 24.5%1, the highest since Q3, 2015, and an increase of 1,230 basis points
  • Diluted earnings per share was $6.60, a 2,175.9% increase from $0.29. 
    Excluding an $0.86 after-tax impact from expenses related to the 2018 performance share ("PSU") modification to account for the unplanned effects of COVID-19, restaurant asset impairment and closure costs, corporate restructuring, legal proceedings as well as other costs, adjusted diluted earnings per share was $7.46, a 1,765.0% increase from $0.401
  • Opened 56 new restaurants including one relocation, and closed five

1Restaurant level operating margin, adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures. Reconciliations to GAAP measures and further information are set forth in the table at the end of this press release.

"Chipotle's second quarter results highlight the strength of our brand and our people, as we demonstrated growing momentum in the business," said Brian Niccol, Chairman and CEO, Chipotle. "We remain confident in our key growth strategies and believe they will help us achieve our next goal of $3 million average unit volumes with industry leading returns on invested capital that improve as we continue to add Chipotlanes. Strong restaurant level economics combined with significant restaurant growth should allow us to optimize earnings power for many years to come."

COVID-19 and Liquidity Update:

The health and well-being of our employees and guests continues to be our top priority. Beyond the investments made in our people, restaurants, and supply chain, we are closely following the recommendations of the CDC and local health departments. We have implemented and enhanced numerous protocols that give our employees and guests confidence that Chipotle remains steadfast in our commitment to keep them safe as capacity restrictions ease and in-restaurant ordering and dining increases.

As of June 30, 2021, Chipotle continues to maintain a strong financial position with nearly $1.2 billion in cash, investments and restricted cash, and no debt. We also have access to a $500 million untapped credit facility. Our financial strength gives us the opportunity to make on-going strategic investments in our people, business, and communities, which we believe will benefit us for years to come.

Results for the three months ended June 30, 2021:

Revenue in the second quarter was $1.9 billion, an increase of 38.7% compared to the second quarter of 2020 and includes a 31.2% increase in comparable restaurant sales. We believe on-going strength in digital sales, the strong recovery of in-restaurant sales, positive customer reception to our new menu items, and lapping the peak of the pandemic from last year contributed to second quarter revenue growth. For Q3, while uncertainty still exists with the potential impact of COVID-19, as well as the pace of the economic recovery, if the current trends continue, we expect our comparable restaurant sales to be in the low to mid double-digits range.

Digital sales grew 10.5% year over year to $916.5 million and represented 48.5% of sales. A little more than half of the digital sales were from order ahead transactions as guests increasingly appreciate both the value and convenience offered by this channel, as well as the added convenience of more Chipotlanes.

We opened 56 new restaurants during the second quarter including one relocation, and closed five restaurants, bringing the total restaurant count to 2,853. During the quarter, 45 of the 56 new restaurants included a Chipotlane. These formats continue to perform very well and are helping enhance guest access and convenience, as well as increase new restaurant sales, margins, and returns.

Food, beverage and packaging costs in the second quarter were 30.4% of revenue, a decrease of nearly 300 basis points compared to the second quarter of 2020. The decrease was primarily due to the benefit of menu price increases as well as lower beef prices, partially offset by higher costs associated with new menu items, like quesadillas, and, to a lesser extent, avocado costs.

Restaurant level operating margin was 24.5%, an increase from 12.2% in the second quarter of 2020. The improvement was driven primarily by leverage from comparable restaurant sales including menu price increases, lower promotional activity as well as lower beef prices, partially offset by higher costs associated with new menu items, wage inflation for one month of the second quarter, and avocados.

General and administrative expenses for the second quarter were $146.0 million on a GAAP basis, or $119.2 million on a non-GAAP basis, excluding $23.5 million for a modification to 2018 performance shares to account for the unplanned effects of COVID-19, $2.1 million of certain legal expenses, and $1.2 million of transformation expenses. GAAP and non-GAAP general and administrative expenses for the second quarter of 2021 also include underlying general and administrative expenses totaling $92.0 million, $22.4 million of non-cash stock compensation, and $4.4 million related to higher bonus accruals as well as payroll taxes on equity vesting and stock option exercises.

The GAAP effective income tax rate for the second quarter was 23.7%, which is lower than our expected effective income tax rate for the full year 2021, due to elevated excess tax benefits related to option exercises and equity vesting in the second quarter. On a non-GAAP basis, the 2021 second quarter effective tax rate was 22.4%.

Net income for the second quarter was $188.0 million, or $6.60 per diluted share, an increase from $8.2 million, or $0.29 per diluted share, in the second quarter of 2020. Excluding the impact of PSU modifications, restaurant asset impairment and closure costs, legal proceeding costs, and corporate restructuring expenses, adjusted net income was $212.8 million and adjusted diluted earnings per share was $7.46.

During the quarter, our Board of Directors approved the investment of up to an additional $200 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, $208.5 million was available as of June 30, 2021. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased $145.3 million of stock at an average price per share of $1,408 during the second quarter.

More information will be available in our Quarterly Report on Form 10-Q, which will be filed with the SEC by the end of July.

Outlook

For 2021, management is anticipating the following:

  • Third quarter comparable restaurant sales growth in the low to mid double-digits range
  • At or slightly above 200 new restaurant openings
  • An estimated effective full year tax rate between 25% and 27%

Definitions

The following definitions apply to these terms as used throughout this release:

  • Comparable restaurant sales, or sales comps, and comparable restaurant transactions, represent the change in period-over-period total revenue or transactions for restaurants in operation for at least 13 full calendar months.
  • Average restaurant sales refer to the average trailing 12-month food and beverage revenue for restaurants in operation for at least 12 full calendar months.
  • Restaurant level operating margin represents total revenue less direct restaurant operating costs, expressed as a percent of total revenue.
  • Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators. Digital sales exclude revenue deferrals associated with Chipotle Rewards.

Conference Call Details

Chipotle will host a conference call to discuss second quarter 2021 financial results on Tuesday, July 20, 2021, at 4:30 PM Eastern time.

SOURCE Chipotle

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