Chipotle: Q4 and Fiscal Year Earnings Surpass Expectations

Executive Summary:

Chipotle Mexican Grill (CMG) delivered strong financial results for Q4 2024, exceeding market expectations despite headwinds. Same-store sales and full-year earnings both exceeded estimates, driven by solid sales growth and margin expansion. The company also provided guidance for fiscal 2025, including plans for aggressive expansion.

Key Highlights:

* Q4 Same-store sales increased by 5.4%, compared to a consensus estimate of 5.67%.
* Full-year same-store sales rose by 7.4%, in line with estimates.
* Adjusted earnings per share for Q4 and the full year met consensus estimates of $0.25 and $1.12, respectively.
* Revenue for Q4 and the full year reached $2.85 billion and $11.3 billion, respectively, meeting consensus forecasts.
* Average check growth for Q4 was 1.4%, slightly above estimates of 1.29%.
* Traffic growth for Q4 and the full year was 4% and 5.3%, respectively, slightly below estimates.

Management Commentary:

New CEO Scott Boatwright expressed optimism about the company's performance, highlighting consistent sales growth and margin expansion. He also outlined plans to open between 315 to 345 new locations in 2025 and emphasized the company's long-term goal of reaching 7,000 restaurants in North America.

Analyst Outlook:

Analysts remain bullish on Chipotle's growth prospects. Stifel's Chris O'Cull believes that the low-to-mid-single-digit same-store sales growth guidance for 2025 is conservative, while Deutsche Bank's Lauren Silberman expects continued strength supported by innovation and marketing initiatives.

Tariffs and Supply Chain:

Investors are monitoring the potential impact of a 25% tariff on Mexican imports announced by the Trump administration. Chipotle imports a significant portion of its avocados from Mexico, which could affect pricing. The company's food, beverage, and packaging costs increased by 29.7% in Q4 due to factors such as inflation.

Operational Innovations:

Chipotle is implementing automation technologies to enhance efficiency. The company is testing a digital makeline that dispenses ingredients automatically, freeing up staff for other tasks. It is also rolling out produce slicers for consistent food preparation.