News

Chipotle shares jump 12%

March 14, 2006

Chipotle Mexican Grill shares jumped 12 percent March 14 just a day after the fast-casual restaurant chain unveiled strong quarterly results in the first public report in its 13-year history.

Shares of Chipotle, majority-owned by McDonald's Corp., ended at $48.70, a gain of $5.29. McDonald's shares were 6 cents at $34.26. Chipotle went public Jan. 26.

According to a MarketWatch report, investors had expected healthy results out of the fast-casual chain but were surprised with the 36-percent surge in sales and the 14.3 percent bounce in same-store sales that fed margin growth and led Chipotle to swing to a fourth-quarter profit from a year-earlier last loss.

Over the next three years, analysts expect Chipotle to swell its store base 15 percent to 18 percent annually. It's likely too, said Merrill Lynch analyst Rachael Rothman, that the chain will look to open smaller versions of its stores to keep new-unit costs lower. The smaller versions are about 2,200 square feet, compared with the original 2,700-square-foot format.

"Chipotle's smaller stores are now delivering sales and margins near the more costly to develop larger formats," Rothman said. "We expect the mix to shift to overweight smaller formats."