On July 24, 2024, Chipotle Mexican Grill Inc (CMG, Financial) released its 8-K filing detailing the financial results for the second quarter ended June 30, 2024. The company reported significant growth in revenue and earnings, surpassing analyst estimates and showcasing strong operational performance.
Company Overview
Chipotle Mexican Grill is the largest fast-casual chain restaurant in the United States, with systemwide sales of $9.9 billion in 2023. The Mexican concept is predominantly company-owned, although it recently inked a development agreement with Alshaya Group in the Middle East. It had a footprint of nearly 3,440 stores at the end of 2023, heavily indexed to the United States, although it maintains a small presence in Canada, the UK, France, and Germany. Chipotle sells burritos, burrito bowls, tacos, quesadillas, and beverages, with a selling proposition built around competitive prices, high-quality food sourcing, speed of service, and convenience. The company generates its revenue entirely from restaurant sales and delivery fees.
Q2 2024 Financial Highlights
Chipotle Mexican Grill Inc (CMG, Financial) reported total revenue of $3.0 billion for the second quarter of 2024, marking an 18.2% increase compared to the same period in 2023. This growth was driven by new restaurant openings and an 11.1% increase in comparable restaurant sales, which included an 8.7% rise in transactions and a 2.4% increase in average check size.
The company's operating margin improved to 19.7%, up from 17.2% in the previous year, while the restaurant-level operating margin increased by 140 basis points to 28.9%. Diluted earnings per share (EPS) rose to $15.32, a 32.0% increase from $11.60 in Q2 2023. Adjusted diluted EPS, which excluded a $0.01 after-tax impact from an unrealized loss on a long-term investment and an increase in legal reserves, was $15.34, a 36.0% increase from $11.60.
Key Metrics and Achievements
| Metric | Q2 2024 | Q2 2023 |
|---|---|---|
| Total Revenue | $3.0 billion | $2.5 billion |
| Comparable Restaurant Sales Growth | 11.1% | 8.7% |
| Operating Margin | 19.7% | 17.2% |
| Diluted EPS | $15.32 | $11.60 |
| Adjusted Diluted EPS | $15.34 | $11.60 |
Operational Performance and Challenges
During the second quarter, Chipotle opened 52 new company-operated restaurants, with 46 featuring a Chipotlane, and one international licensed restaurant. These new formats have enhanced guest access and convenience, contributing to increased sales, margins, and returns. Digital sales accounted for 35.3% of total food and beverage revenue, reflecting the company's strong digital presence.
Food, beverage, and packaging costs remained stable at 29.4% of total revenue, despite inflationary pressures on avocados and increased oil usage for frying chips. The company also faced higher labor costs, which were partially offset by sales leverage.
Financial Statements Overview
Chipotle's net income for Q2 2024 was $455.7 million, or $15.32 per diluted share, compared to $341.8 million, or $11.60 per diluted share, in Q2 2023. The effective income tax rate increased to 25.0% from 23.8% due to a decrease in tax benefits related to option exercises and equity vesting.
As of June 30, 2024, Chipotle had $806.5 million in cash and cash equivalents, up from $560.6 million at the end of 2023. The company repurchased $151.4 million of stock during the quarter, with $647.7 million remaining under share repurchase authorizations.
Conclusion
Chipotle Mexican Grill Inc (CMG, Financial) has demonstrated robust financial performance in Q2 2024, exceeding analyst estimates and showcasing strong growth in revenue and earnings. The company's strategic focus on new restaurant openings, digital sales, and operational efficiency has contributed to its success. Investors and stakeholders will be keen to monitor Chipotle's continued growth and performance in the coming quarters.
Explore the complete 8-K earnings release (here) from Chipotle Mexican Grill Inc for further details.
