Article
Chipotle revenue up 12%
Riding high on a wave of comps, revenue and net income increases, the company continues to pursue its quest for providing food with integrity.
February 11, 2010 by Valerie Killifer — senior editor, NetWorld Alliance
Chipotle Mexican Grill's same-store sales increased 2 percent during the company's 2009 fourth quarter, ended Dec. 31, 2009. Comparable restaurant sales growth was driven by the impact of menu price increases enacted in the same quarter of 2008, according to the company's earnings release.
"The menu price increase we took in the fourth quarter of 2008 drove the comp, adding 2.4 percent in the quarter and 6 percent for the full year," Chipotle's chief financial officer Jack Hartung said in the company's Feb. 12 earnings call. "It's now been over a year since we took any price increase in any market, and in some markets it's approaching two years. And though we believe we have pricing power relative to our competitors, with the current chain food inflation outlook, we don't have any current plans to increase prices."
Hartung went on to say that outlook may change as the company continues to review Food With Integrity investments "But based on our current industry leading margins and the uncertainty with the economy and consumer confidence, we're in a good position to be patient about menu prices," he said.
Revenue for the quarter increased 12.2 percent to $387.5 million, a direct result of new restaurants not in the comparable base and the 2.0 percent comps increase. Net income for the fourth quarter was $31.6 million, or $0.99 per diluted share, compared to $17.0 million, or $0.52 per diluted share, in the fourth quarter of 2008.
During the quarter Chipotle also opened 45 new restaurants, bringing the total restaurant count to 956. The company also unveiled a new restaurant design last year. (Click here to view a slideshow of the new design.)
"During 2009, we remained focused on our mission to change the way the world thinks about and eats fast food, while continuing to strengthen our people culture and our unit economic model. We are more committed than ever to providing the best dining experience we can and serving food made from the finest ingredients, which were raised with respect for the animals, the environment, the farmers, and ultimately our customers," Chipotle founder, chairman, and Co-CEO Steve Ells said.
Year-end review
Revenue for the year ended Dec. 31, 2009, was $1.518 billion, up 14 percent from the previous year. The growth in revenue was the direct result of new restaurants not in the comparable base and a 2.2 percent increase in comparable restaurant sales.
Net income for the full year 2009 was $126.8 million, or $3.95 per diluted share, compared to $78.2 million, or $2.36 per diluted share for 2008.
For the full year, Chipotle opened 121 new restaurants.
"Our continued focus on developing more restaurateurs resulted in extraordinary labor efficiencies during 2009. These efficiencies were the direct result of our highest performers working more efficiently while delivering exceptional food and outstanding customer service. These efficiencies helped us achieve record margins which we believe can be largely sustained as we enter 2010," Co-CEO Monty Moran said.
Moving forward
This year, the company plans to open an additional 120 to 130 locations, including its first location in London in May.
"While we describe our entry into Europe as introducing the Chipotle brand and beginning to build a team of future leaders there, we expect the seeds we plant today to turn into growth opportunities for us in the future," Ells said during the earnings conference call. "With that in mind, we are actively searching for additional sites in London and have also begun to look for locations in Paris and other cities in Germany."
To aid their development in Europe, the company has moved former chief development officer Rex Jones, into the role of executive director of Real Estate, focusing solely on international expansion. Bob Blessing, who had been serving as Chipotle's restaurant support officer, will take the role of chief development officer.
Chipotle also will continue with its Food With Integrity initiatives.
Ells said the company been working to increase its supply of naturally raised beef and as of today, more than 60 percent of all its beef is naturally raised. "But we expect to have 100 percent of our barbacoa, our spicy shredded beef, coming from these more sustainable sources in the coming months," he said.
Plans also are underway to find pasture-raised cattle on dairy farms that can provide enough milk for our cheese and sour cream for the company to move to 100 percent pasture raised dairy. That hurdle is expected to be cleared by the end of the year.
To further tell the company's story, Chipotle will introduce new packaging in its restaurants in the coming months that will incorporate "Food With Integrity" messages on all the bags and cups. The initiative is designed to giving the company "additional opportunities to help educate the customers and empower them to help share our story. Our new marketing strategy has been long time in the making and we feel like we have a really great approach now," Ells said.
It also will continue to make use of other marketing program components, including public relations to help tell the story.
"On that front, we began 2010 with a segment on the Oprah Winfrey show, reaching some 5 million people as part of a larger conversation about issues in food. This appearance promoted an increasing curiosity about Chipotle and our Food With Integrity efforts, which we saw in both our restaurants and through visits to our website in the days immediately following the segment," Ells said. "Many of the comments came from people who were not familiar with Chipotle and our story. And we have more non-traditional marketing components lined up throughout the year."
