Chipotle Mexican Grill (CMG) navigated several challenges to meet expectations in its fourth-quarter earnings report, released after market close on Tuesday. The fast-casual restaurant chain faced adverse weather conditions and challenging comparisons to a strong second quarter, fueled by the popular chicken al pastor promotion. Despite these hurdles, Chipotle reported a 5.4% increase in same-store sales for the fourth quarter and a 7.4% rise for the full year.
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New CEO Scott Boatwright, who previously served as chief operations officer under former CEO Brian Niccol since 2017, highlighted the company’s consistent “strong transaction” driven sales growth and margin expansion in each quarter during the earnings call. Looking ahead to fiscal 2025, Chipotle projects low- to mid-single-digit same-store sales growth, acknowledging the “progressively tougher” year-over-year comparisons, according to CFO Adam Rymer. The company also plans to open between 315 and 345 new locations this fiscal year, furthering its ambitious goal of reaching 7,000 restaurants across North America from its current count of over 3,700.
Conservative Guidance Sparks Market Reaction
This initial guidance under Boatwright’s leadership was perceived as conservative by some analysts. Stifel analyst Chris O’Cull, for instance, had anticipated mid-single-digit same-store sales growth for the full year, aligning with the Wall Street consensus estimate of 5.3%. This cautious outlook contributed to a 5% decline in Chipotle’s share price during after-hours trading.
Chipotle’s Q4 and Full-Year Performance: A Closer Look
Chipotle’s fourth-quarter results, compared to Bloomberg consensus estimates:
- Adjusted earnings per share: $0.25 (met expectations of $0.25)
- Revenue: $2.85 billion (met expectations of $2.85 billion)
- Same-store sales growth: 5.4% (slightly below the estimated 5.67%)
- Average check growth: 1.4% (exceeded the estimated 1.29%)
- Traffic growth: 4% (slightly below the estimated 4.41%)
Full fiscal year results compared to Bloomberg consensus estimates:
- Adjusted earnings per share: $1.12 (met expectations of $1.12)
- Revenue: $11.3 billion (slightly below the estimated $11.32 billion)
- Same-store sales growth: 7.4% (met expectations of 7.4%)
- Average check growth: 2.1% (slightly exceeded the estimated 1.99%)
- Traffic growth: 5.3% (slightly below the estimated 5.45%)
Potential Impact of Tariffs on Chipotle’s Costs
While the provided guidance doesn’t factor in potential tariff impacts, CFO Adam Rymer addressed the issue during the earnings call. The recently announced 25% tariff on Mexican and Canadian imports, along with an additional 10% tariff on Chinese goods, could affect Chipotle’s cost of sales. However, Rymer noted that only 2% of Chipotle’s total sales are derived from Mexico, primarily for ingredients like avocados, tomatoes, limes, and peppers. Furthermore, Chipotle diversifies its avocado sourcing, with half coming from Mexico and the remainder from Colombia, Peru, and the Dominican Republic. Imports from Canada and China represent less than 0.5% of Chipotle’s total sales.
Rymer estimated that if the proposed tariffs are fully implemented, they could increase Chipotle’s cost of sales by approximately 60 basis points.
Conclusion: Navigating Uncertainty and Maintaining Growth
Chipotle delivered a solid performance in Q4 and the full fiscal year 2024, despite facing various challenges. While the company’s conservative guidance for 2025 and the looming threat of tariffs introduce uncertainty, Chipotle’s consistent focus on operational efficiency, menu innovation, and strategic expansion positions it for continued growth in the competitive fast-casual dining market. The company’s ability to adapt to changing market dynamics and consumer preferences will be crucial for sustaining its long-term success.
