Mexican fast-food chain Chipotle (NYSE:CMG) fell short of analysts' expectations in Q3 FY2023, with revenue up 11.3% year on year to $2.47 billion. Turning to EPS, Chipotle made a non-GAAP profit of $11.36 per share, improving from its profit of $9.51 per share in the same quarter last year.
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Chipotle (CMG) Q3 FY2023 Highlights:
- Revenue: $2.47 billion vs analyst estimates of $2.47 billion (small miss)
- EPS (non-GAAP): $11.36 vs analyst estimates of $10.63 (6.86% beat)
- Free Cash Flow of $349.3 million, down 21.6% from the previous quarter
- Gross Margin (GAAP): 40.3%, up from 39.8% in the same quarter last year
- Same-Store Sales were up 5% year on year
- Store Locations: 3,321 at quarter end, increasing by 231 over the last 12 months
Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE:CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.
Modern Fast FoodModern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.
Sales GrowthChipotle is one of the most widely recognized restaurant chains in the world and benefits from brand equity, giving it customer loyalty and more influence over purchasing decisions.
As you can see below, the company's annualized revenue growth rate of 15.4% over the last four years (we compare to 2019 to normalize for COVID-19 impacts) was excellent as it added more dining locations and increased sales at existing, established restaurants.
This quarter, Chipotle's revenue grew 11.3% year on year to $2.47 billion, falling short of Wall Street's estimates. Looking ahead, the analysts covering the company expect sales to grow 12.9% over the next 12 months.
Number of Stores When a chain like Chipotle is opening new restaurants, it usually means it's investing for growth because there's healthy demand for its meals and there are markets where the concept has few or no locations. Chipotle's restaurant count increased by 231, or 7.48%, over the last 12 months to 3,321 locations in the most recently reported quarter.
Over the last two years, Chipotle has rapidly opened new restaurants, averaging 7.18% annual increases in new locations. This growth is among the fastest in the restaurant sector. Analyzing a restaurant's location growth is important because expansion means Chipotle has more opportunities to feed customers and generate sales.
Same-Store SalesSame-store sales growth is an important metric that tracks organic growth and demand for a restaurant's established locations.
Chipotle's demand has outpaced the broader restaurant sector over the last eight quarters. On average, the company has grown its same-store sales by a robust 8.85% year on year. With positive same-store sales growth amid an increasing number of restaurants, Chipotle is reaching more diners and growing sales.
In the latest quarter, Chipotle's same-store sales rose 5% year on year. This growth was a deceleration from the 7.6% year-on-year increase it posted 12 months ago, showing the business is still performing well but lost a bit of steam.
Key Takeaways from Chipotle's Q3 Results Sporting a market capitalization of $50.8 billion, more than $1.45 billion in cash on hand, and positive free cash flow over the last 12 months, we believe that Chipotle is attractively positioned to invest in growth.
It was great to see Chipotle beat analysts' adjusted EPS estimates, driven by higher-than-expected same-store sales growth. On the other hand, it didn't open as many restaurants as Wall Street was hoping for, leading to a revenue miss. Overall, the results could have been better. The company is down 1.58% on the results and currently trades at $1,832.13 per share.
The author has no position in any of the stocks mentioned in this report.
