On Thursday, Chipotle Mexican Grill Inc (NYSE: CMG) issued its third-quarter results, smashing Wall Street's estimates for both earnings and revenue. Menu price increases helped the burrito chain weather through the storm caused by higher costs on beef and freight, with shares rising 33% this year, resulting in a market value of $51.79 billion.
Revenue rose 21.9% to $1.95 billion slightly exceeding the expected $1.94 billion. Same-store sales rose 15.1%, also exceeding 14% that StreetAccount expected. Digital sales that more than tripled a year ago increased by 8.6%. During the quarter, the company opened 41 new restaurants.
Net income for the quarter that ended on September 30th amounted to $204.4 million, or $7.18 per share. As a comparison, during the same quarter last year, it made $80.2 million, or $2.82 per share a year earlier. The food chain successfully weathered cost increases of freight and beef by increasing its own menu prices. It announced the 4% increase back in June to cover the cost of increasing restaurant workers' wages to an average of $15 an hour.
Putting a tax benefit, restructuring costs, and other items aside, earnings per share become $7.02, also topping $6.32 per share that Refinitiv survey of analysts expected.
The Strategy is Paying Off
In two and a half years, the company's loyalty program gathered 24.5 million members and according to CEO Brian Niccol, there's still a lot of room to grow. Although the company is still facing challenges such as the labor crunch that's hitting the broader industry, its strategies show it is handling it better than its industry peers. There is also the impact of inflation on construction materials, shortages of subcontractor labor and equipment, and landlord delivery delays. Under Niccol, who previously led Yum! Brands Inc (NYSE: YUM)-owned Taco Bell, the company has accelerated adding new menu items through a process it calls stage-gate testing with the aim to drive customer traffic to restaurants and keep the menu from getting bloated.
The company is projecting same-store sales growth in the low-to-mid double-digits range. Several uncertainties have been noted as possibly weighing on the business for the foreseeable future, including inflation, staffing pressures, and Covid-19. But the CFO Jack Hartung remains confident in the company's ability to drive restaurant margins higher as average unit volumes increase.
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