Newport Beach / CA. (cmg) Chipotle Mexican Grill Inc. reported financial results for its second quarter ended June 30, 2023. Second quarter highlights, year over year:
- Total revenue increased 13.6 percent to USD 2.5 billion
- Comparable restaurant sales increased 7.4 percent
- In-restaurant sales increased 15.8 percent, while digital sales represented 38.0 percent of food and beverage revenue
- Operating margin was 17.2 percent, an increase from 15.3 percent
- Restaurant level operating margin was 27.5 percent 1, an increase of 230 basis points
- Diluted earnings per share was USD 12.32, a 33.2 percent increase from USD 9.25. Excluding a USD 0.33 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs and corporate restructuring, adjusted diluted earnings per share was USD 12.65, a 36.0 percent increase from USD 9.30 1
- Opened 47 new restaurants with 40 locations including a Chipotlane
«Chipotle’s second quarter results demonstrate our ability to drive strong performance by focusing on exceptional food and exceptional people. Additionally, our investment in our employees, technology, and innovation in our restaurants along with expanding access and convenience in North America and laying the groundwork for international growth, set us up for long term success.» said Brian Niccol, Chairman and CEO, Chipotle.
Results for the three months ended June 30, 2023
Total revenue in the second quarter was USD 2.5 billion, an increase of 13.6 percent compared to the second quarter of 2022. The increase in total revenue was driven by a 7.4 percent increase in comparable restaurant sales and new restaurant openings. In-restaurant sales in the second quarter increased 15.8 percent, compared to the second quarter of 2022, while digital sales represented 38.0 percent of total food and beverage revenue.
We opened 47 new restaurants during the second quarter with 40 locations including a Chipotlane. These formats continue to perform 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 29.4 percent of total revenue, a decrease of about 100 basis points compared to the second quarter of 2022. This decrease results from the benefit of menu price increases taken in the prior year and lower avocado prices, which were partially offset by inflation across several food costs, primarily beef, tortillas, dairy, salsa, beans and rice.
Restaurant level operating margin in the second quarter was 27.5 percent compared to 25.2 percent in the second quarter of 2022. The improvement was primarily due to the benefit of sales leverage and, to a lesser extent, lower avocado prices. These decreases were partially offset by higher inflation across several food costs, and to a lesser extent, wage inflation.
General and administrative expenses for the second quarter were USD 156.5 million on a GAAP basis, or USD 153.0 on a non-GAAP basis, excluding USD 3.5 million of corporate restructuring costs related to the May 2023 optimization of our organizational structure. GAAP and non-GAAP general and administrative expenses for the second quarter also include USD 118.8 million of underlying general and administrative expenses, USD 29.2 million of non-cash stock compensation, and USD 4.6 million of higher performance-based accruals and payroll taxes on equity vesting and exercises.
The effective income tax rate for the second quarter was 23.8 percent compared to 25.3 percent in the second quarter of 2022. The decrease in the effective income tax rate was primarily due to an increase in tax benefits related to option exercises and equity vesting.
Net income for the second quarter was USD 341.8 million, or USD 12.32 per diluted share, compared to USD 259.9 million, or USD 9.25 per diluted share, in the second quarter of 2022. In the second quarter of 2023, excluding the USD 0.33 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs and corporate restructuring, adjusted diluted earnings per share was USD 12.65.
During the second quarter, our Board of Directors approved the investment of up to an additional USD 100 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, USD 294.7 million was available as of June 30, 2023. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased USD 87.6 million of stock at an average price per share of USD 1,937.35 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 2023, management is anticipating the following:
- Third quarter comparable restaurant sales growth in the low to mid-single digit range
- Full year comparable restaurant sales growth in the mid to high-single digit range
- 255 to 285 new restaurant openings (including 10 to 15 relocations to add a Chipotlane), which assumes utility, construction, permit and material supply delays do not worsen
- An estimated underlying effective full year tax rate between 25 percent and 27 percent before discrete items
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 include revenue deferrals associated with Chipotle Rewards.
- In-restaurant sales represent food and beverage revenue generated on-premise. In-restaurant sales includes revenue deferrals associated with Chipotle Rewards.
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