Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chipotle Mexican Grill Inc (CMG, Financial) reported a sales growth of over 6% to reach $2.9 billion in the first quarter.
- The launch of Chipotle Honey Chicken has been successful, driving incremental transactions and receiving positive guest feedback.
- The company opened 57 new restaurants in the quarter, with plans to open between 315 and 345 new restaurants this year.
- Chipotle Mexican Grill Inc (CMG) is investing in technology and innovation, including the rollout of produce slicers and a new equipment package to improve efficiency.
- The company maintains a strong balance sheet with $2.1 billion in cash and no debt, allowing for continued investment in growth and innovation.
Negative Points
- Comparable sales declined by 0.4% in the first quarter, indicating a slowdown in consumer spending.
- Restaurant level margin decreased by 130 basis points year over year to 26.2%.
- The company faces headwinds from inflation and higher usage costs, particularly in avocados, dairy, and chicken.
- Chipotle Mexican Grill Inc (CMG) is experiencing a slowdown in underlying transaction trends due to consumer uncertainty and economic concerns.
- The impact of tariffs on cost of sales and new store builds remains uncertain, potentially affecting margins and capital expenditures.
Q & A Highlights
Q: What gives you confidence that fast casual competition won't impede your target for positive traffic in the back half of this year?
A: Scott Boatwright, CEO, stated that Chipotle's strong value proposition, unmatched speed, and brand strength give confidence. Despite competition, Chipotle often sees increased traffic and garners more than its fair share when competitors open nearby.
Q: How should we think about the impact of tariffs on new starts or CapEx?
A: Adam Rymer, CFO, mentioned that the impact of tariffs on new store builds is still in flux, but they anticipate a mid-single-digit increase. However, recent news suggests this percentage could decrease, potentially minimizing the impact on new store returns.
Q: Are you seeing any fundamental change in consumer behavior, or is it just difficult comparisons?
A: Scott Boatwright, CEO, noted that consumer spending is impacted by economic uncertainty, leading to reduced restaurant visits. However, Chipotle's brand remains strong, and the slowdown is attributed to a combination of factors, including tough comparisons and macroeconomic conditions.
Q: Is there room to increase marketing spend if returns are positive?
A: Scott Boatwright, CEO, indicated that they have ramped up marketing spend for the summer to maintain relevance. They are focused on return on ad spend and exploring digital and social channels to reach consumers effectively.
Q: How did you diagnose that the slowdown was macro-related and not specific to Chipotle?
A: Scott Boatwright, CEO, expressed confidence in the brand's strength, citing strong KPIs and consumer perception. The slowdown is believed to be primarily macro-related, as internal metrics and consumer studies show no specific issues with Chipotle.
Q: What are the trends in your international markets, particularly Canada and the UK?
A: Scott Boatwright, CEO, reported strong performance in Canada with US-level margins and plans for growth. In Western Europe, they are seeing improved restaurant-level margins and are exploring development opportunities in Central London and Germany.
Q: Are you considering more frequent LTOs (Limited Time Offers) in the future?
A: Scott Boatwright, CEO, mentioned that while Chipotle is not an LTO-driven brand, they may consider up to three LTOs in the future to maintain consumer engagement and avoid asking LTOs to work too hard over extended periods.
Q: What impact do you expect from the high-efficiency kitchen equipment package?
A: Scott Boatwright, CEO, stated that they are testing the equipment package in 100 additional restaurants. While they anticipate margin savings, they are still determining how much will be reinvested into the consumer experience versus captured as margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
