Chipotle (“CMG”) (CMG, Financial)
Chipotle delivered another year of impressive results in 2022, expanding same-store sales and restaurant-level margins despite facing one of the highest inflationary environments on record.
During 2022, Chipotle grew same-store sales by 8%, or 31% from 2019 levels. While 2022 growth was driven by price increases to offset cost inflation, traffic is still up materially from 2019 levels as the company’s strong value proposition and menu innovations continue to resonate with customers. Chipotle offers high-quality and affordable food with a chicken entrée priced below $9 on average. This pricing remains a meaningful discount to alternatives from fast-casual competitors and represents tremendous value given Chipotle’s unrivaled use of wholesome ingredients, fresh preparation, customization, and convenience.
Chipotle’s attractive unit economic model remains firmly intact despite the inflationary environment. The company was one of the few businesses in the restaurant industry to expand margins in 2022, with restaurant-level margins up 130 basis points (bps) to 23.9%. Management has also highlighted the opportunity to further increase same-store sales and profitability by improving throughput in the near term.
The company’s growth runway remains robust. In North America, management estimates its potential to more than double its restaurant count to 7,000 over time by adding small-town locations and focusing on the high-performing Chipotlane digital drive-thru format, which represents over 80% of new store openings and is currently only 18% of the store base.
In addition to new restaurants in North America, Chipotle’s many growth opportunities include menu innovation such as the recently launched chicken al pastor, loyalty program enhancements, and eventually international store growth and a breakfast offering.
From Bill Ackman (Trades, Portfolio)'s Pershing Square 2022 annual letter.
