News

Chipotle remains solid despite rising food costs

July 19, 2013

Chipotle didn't let down analysts this quarter when it posted solid second quarter earnings Thursday. The chain, which opened 44 new units this quarter, increased revenue 18.2 percent to $816.8 million with comparable store sales growing 5.5 percent. (Averageanalyst estimates predicted revenues to expand 16.4 percent to $803.9 million.)

Other highlights included:

• Restaurant level operating margin was 27.6 percent, a decrease of 160 basis points.
• Net income was $87.9 million, an increase of 7.6 percent and
• Diluted earnings per share was $2.82, an increase of 10.2 percent.

Rising food costs

The chain's growth was despite rising food costs, which were 33.1 percent of the chain's revenue, an increase of 100 basis points driven by higher commodity costs, said Steve Ells, Chipotle's founder. Higher commodity costs were driven by increased prices for all salsa ingredients, as well as for dairy items and chicken, but were partially offset by lower avocado prices.

Going forward

For 2013, management expects the following:

• To open 165 to 180 new restaurants;
• Low-to-middle single digit comparable restaurant sales; and
• An effective full-year tax rate of approximately 38.9 percent — 39.4 percent for the remainder of 2013.

Read more about operations management.