CHIPOTLE MEXICAN GRILL INC
For the period ended Sep 30, 2024. Filed Oct 30, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 30, 2024
CMG$34.43-2.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-07-25.
0001058090-24-000032
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-30.
0001058090-24-000050
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 66 previous paragraphs and 68 current paragraphs.
36 unchanged; 22 reworded; 10 added; 8 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 14 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
•Food, beverage, and packaging as a percentage of total revenue
Current report
•Labor as a percentage of total revenue
Current report
•Occupancy as a percentage of total revenue
Current report
•Total revenue increased 13.0% to $2.8 billion
Current report
•Comparable restaurant sales increased 6.0%
Current report
•Diluted earnings per share was $0.28, a 21.7% increase from $0.23, which includes a $0.01 after-tax net benefit in stock-based compensation expense due to unvested equity awards forfeited by our former CEO and related retention equity awards granted to key executives, an unrealized gain on a long-term investment, and an impairment charge related to a software asset.
Current report
Food, beverage and packaging costs increased 0.9% as a percentage of total revenue for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was due to inflation across several ingredient costs, primarily avocados and dairy, higher usage of ingredients as we focused on ensuring consistent and generous portions, and a protein mix shift from the Smoked Brisket limited time offering. This increase was partially offset by a 1.2% benefit from menu price increases in the prior year.
Current report
Occupancy costs remained flat as a percentage of total revenue for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The 0.3% benefit from sales leverage was offset by 0.2% due to increased occupancy expense associated with existing restaurants.
Current report
Impairment, closure costs, and asset disposals increased in dollar terms for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to property and equipment impairment charges related to a software asset.
Current report
The effective income tax rate remained flat for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The nine months ended September 30, 2024, had a 0.6% decrease in tax benefits related to option exercises and equity vesting and a 0.3% decrease in return to provision benefit in 2023 versus 2024, partially offset by a 0.5% decrease in tax reserves and 0.4% reduction in nondeductible expenses.
Removed paragraphs (8)
Previous report
•Total revenue increased 18.2% to $3.0 billion
Previous report
•Comparable restaurant sales increased 11.1%
Previous report
•Diluted earnings per share was $0.33, a 32.0% increase from $0.25, which includes a $0.01 after-tax impact from an unrealized loss on a long-term investment and an increase in legal reserves.
Previous report
Restaurant Operating Costs. During the three months ended June 30, 2024, our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) were 71.1% of total revenue, a decrease from 72.5% during the three months ended June 30, 2023. The decrease was driven by the benefit of sales leverage, partially offset by wage inflation and, to a lesser extent, inflation across several food costs.
Previous report
Food, beverage and packaging costs remained flat as a percentage of total revenue for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, including a 1.2% benefit from menu price increases in the prior year. This benefit was partially offset by inflation of avocados, increased oil usage for frying chips, and higher incidence of beef as a result of the continued success of our Braised Beef Barbacoa marketing initiative.
Previous report
Impairment, closure costs, and asset disposals decreased in dollar terms for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to elevated impairment of operating lease assets and leasehold improvements in the comparable period, which included the impact of our decision to close Pizzeria Locale.
Previous report
*Not meaningful
Previous report
The effective income tax rate for the six months ended June 30, 2024 was 23.7%, an increase from an effective income tax rate of 23.2% for the six months ended June 30, 2023, primarily due to a decrease in tax benefits from option exercises and equity vesting, partially offset with a decrease in tax reserves.
Reworded paragraphs (22)
Previous wording
As of June 30, 2024, we operated 3,460 Chipotle restaurants throughout the United States and 70 international Chipotle restaurants. Additionally, we had one international licensed restaurant. We manage our U.S. operations based on nine regions and aggregate our operations to one reportable segment.
Current wording
As of September 30, 2024, we operated 3,540 Chipotle restaurants throughout the United States and 75 international Chipotle restaurants. Additionally, we had two international licensed restaurants. We manage our U.S. operations based on nine regions and aggregate our operations to one reportable segment.
Previous wording
•Restaurant operating costs as a percentage of total revenue
Current wording
•Other operating costs as a percentage of total revenue
Previous wording
Second Quarter 2024 Financial Highlights, year-over-year:
Current wording
Third Quarter 2024 Financial Highlights, year-over-year:
Previous wording
Sales Trends. Comparable restaurant sales increased 11.1% for the three months ended June 30, 2024. The increase is primarily attributable to higher transactions and, to a lesser extent, an increase in average check. Comparable restaurant sales represent the change in period-over-period total revenue for restaurants in operation for at least 13 full calendar months. Digital sales represented 35.3% of total food and beverage revenue.
Current wording
Sales Trends. Comparable restaurant sales increased 6.0% for the three months ended September 30, 2024. The increase is attributable to higher transactions of 3.3% and a 2.7% increase in average check. Comparable restaurant sales represent the change in period-over-period total revenue for restaurants in operation for at least 13 full calendar months. Digital sales represented 34.0% of total food and beverage revenue.
Previous wording
Restaurant Development. During the three months ended June 30, 2024, we opened 52 company-operated restaurants, which included 46 restaurants with a Chipotlane. We are on track to open approximately 285-315 new restaurants in 2024. We expect that at least 80% of our new restaurants will include a Chipotlane.
Current wording
Restaurant Development. During the three months ended September 30, 2024, we opened 86 company-operated restaurants, which included 73 restaurants with a Chipotlane. We are on track to open approximately 285 to 315 new company-operated restaurants in 2024 and expect to open approximately 315 to 345 new company-operated restaurants in 2025, which assumes utility, construction, permit and inspection delays do not worsen. We expect that at least 80% of our new company-operated restaurants will include a Chipotlane.
Previous wording
Licensing. In April 2024, our first licensed location opened in Kuwait City in partnership with international licensed retail operator Alshaya Group. Our location in Kuwait marks the first time the we have entered a new country in over 10 years, and is our only licensed restaurant.
Current wording
Licensing. During the three months ended September 30, 2024, we opened one licensed restaurant in Kuwait in partnership with international licensed retail operator Alshaya Group.
Previous wording
Cultivate Next Fund. Our Cultivate Next Fund is a venture formed to make early-stage investments into strategically aligned companies that further our mission to Cultivate a Better World. The Fund has a size of $100.0 million, which is financed almost entirely by Chipotle. As of June 30, 2024, we have made $34.0 million in investments through this Fund.
Current wording
Cultivate Next Fund. Our Cultivate Next Fund is a venture formed to make early-stage investments into strategically aligned companies that further our mission to Cultivate a Better World. The Fund has a size of $100.0 million, which is financed almost entirely by Chipotle. During the three months ended September 30, 2024, we made $28.0 million in investments through this Fund.
Previous wording
(1)Average restaurant sales refer to the average trailing 12-month food and beverage sales for restaurants in operation for at least 12 full calendar months.
Current wording
(1)Average restaurant sales refer to the average trailing 12-month food and beverage revenue for restaurants in operation for at least 12 full calendar months.
Previous wording
Food, beverage and packaging costs decreased 0.2% as a percentage of total revenue for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, including a 1.0% benefit from menu price increases in the prior year. This benefit was partially offset by inflation of avocados, higher incidence of beef from a Braised Beef Barbacoa marketing initiative and increased oil usage for frying chips.
Current wording
Food, beverage and packaging costs increased 0.2% as a percentage of total revenue for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was due to higher usage of ingredients as we focused on ensuring consistent and generous portions, inflation across several ingredient costs, primarily avocados, and a protein mix shift from a Braised Beef Barbacoa marketing initiative and the Smoked Brisket limited time offering. This increase was partially offset by a 1.1% benefit from menu price increases in the prior year.
Previous wording
Labor costs decreased 0.2% as a percentage of total revenue for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, including 1.5% from sales leverage, partially offset by 1.1% due to restaurant wage inflation, of which 0.5% was due to the minimum wage for restaurants like Chipotle in California increasing to $20 per hour in April 2024.
Current wording
Labor costs remained flat as a percentage of total revenue for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The 1.0% benefit from sales leverage was offset by 0.8% due to restaurant wage inflation, of which 0.5% was due to minimum wage increases for our restaurants in California.
Previous wording
Labor costs decreased 0.3% as a percentage of total revenue for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, including 1.3% from sales leverage, partially offset by 0.8% due to restaurant wage inflation, of which 0.3% was due to the minimum wage for restaurants like Chipotle in California increasing to $20 per hour in April 2024.
Current wording
Labor costs decreased 0.1% as a percentage of total revenue for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, including 1.2% from sales leverage, partially offset by 0.9% due to restaurant wage inflation, of which 0.3% was due to minimum wage increases for our restaurants in California.
Previous wording
Occupancy costs decreased 0.2% as a percentage of total revenue for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively, primarily due to sales leverage, partially offset by increased occupancy expense associated with existing restaurants.
Current wording
Occupancy costs decreased 0.2% as a percentage of total revenue for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, including 0.4% from sales leverage, partially offset by 0.2% due to increased occupancy expense associated with existing restaurants.
Previous wording
Other operating costs decreased 1.0% as a percentage of total revenue for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, respectively, primarily due to 0.8% of sales leverage, a 0.1% decrease in restaurant technology costs, and 0.1% of lower delivery expenses, partially offset by 0.1% of increased utilities expense.
Current wording
Other operating costs decreased 0.2% as a percentage of total revenue for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to 0.4% of sales leverage and 0.2% of lower delivery expenses, partially offset by 0.2% of higher advertising and marketing promotions expense.
Previous wording
Other operating costs decreased 1.0% as a percentage of total revenue for thesix months ended June 30, 2024 compared to the six months ended June 30, 2023, respectively, primarily due to 0.7% of sales leverage, 0.2% of lower delivery expenses, and 0.1% of lower advertisement and marketing promotions expense.
Current wording
Other operating costs decreased 0.7% as a percentage of total revenue for thenine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to 0.6% of sales leverage and 0.2% of lower delivery expenses.
Previous wording
Depreciation and amortization decreased 0.3% as a percentage of total revenue for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, primarily due to sales leverage, partially offset by increased depreciation expense associated with new restaurants.
Current wording
Depreciation and amortization decreased 0.2% as a percentage of total revenue for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023, primarily due to sales leverage, partially offset by increased depreciation expense associated with new restaurants.
Previous wording
Impairment, closure costs, and asset disposals decreased in dollar terms for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to elevated impairment of operating lease assets and leasehold improvements and higher charges related to the replacement of certain leasehold improvements and kitchen equipment in the comparable period.
Current wording
Impairment, closure costs, and asset disposals decreased in dollar terms for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily due to higher charges related to the replacement of certain leasehold improvements in the comparable period.
Previous wording
Interest and other income, netincreased in dollar terms for thethree and six months ended June 30, 2024 compared to thethree and six months ended June 30, 2023, primarily due to increased interest income on our investments in U.S. Treasury securities, money market funds and time deposits due to a higher average investment balance and higher interest rates, which was partially offset by an unrealized loss on a long-term investment.
Current wording
Interest and other income, netincreased in dollar terms for thethree andnine months ended September 30, 2024 compared to thethree andnine months ended September 30, 2023, primarily due to increased interest income on our investments in U.S. Treasury securities, money market funds and time deposits due to a higher average investment balance and higher interest rates.
Previous wording
The effective income tax rate for the three months ended June 30, 2024 was 25.0%, an increase from an effective income tax rate of 23.8% for the three months ended June 30, 2023, primarily due to a decrease in tax benefits from option exercises and equity vesting, partially offset with a decrease in tax reserves.
Current wording
The effective income tax rate decreased 1.3% for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, including 1.3% reduction in nondeductible expenses, a 0.4% release of income tax reserves, and a 0.4% in additional tax benefits related to option exercises and equity vesting, partially offset with a 0.8% decrease in return to provision benefit in 2023 versus 2024.
Previous wording
As of June 30, 2024, we had a cash and marketable investments balance of$2.4 billion, non-marketable investments of$68.6 million and$27.7 million of restricted cash. After funding the current operations in our restaurants and support centers, the first planned use of our cash flow from operations is to provide capital for the continued investment in new restaurant construction. In addition to continuing to invest in our restaurant expansion, we expect to utilize cash flow from operations to: repurchase additional shares of our common stock subject to market conditions; invest in, maintain, and refurbish our existing restaurants; and for general corporate purposes. As of June 30, 2024,$647.7 million remained available for repurchases of shares of our common stock. Under the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions.
Current wording
As of September 30, 2024, we had a cash and marketable investments balance of$2.2 billion, non-marketable investments of$85.4 million and$28.0 million of restricted cash. After funding the current operations in our restaurants and support centers, the first planned use of our cash flow from operations is to provide capital for the continued investment in new restaurant construction. In addition to continuing to invest in our restaurant expansion, we expect to utilize cash flow from operations to: repurchase additional shares of our common stock subject to market conditions; invest in, maintain, and refurbish our existing restaurants; and for general corporate purposes. As of September 30, 2024,$1,059.6 million remained available for repurchases of shares of our common stock. Under the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions.
Previous wording
Cash provided by operating activities was $1.1 billion for the six months ended June 30, 2024, compared to $1.0 billion for the six months ended June 30, 2023. The increase was primarily due to higher net earnings and, to a lesser extent, net cash changes in non-tax operating assets and liabilities. This increase was partially offset by timing of tax-related payments.
Current wording
Cash provided by operating activities was $1.6 billion for the nine months ended September 30, 2024, compared to $1.5 billion for the nine months ended September 30, 2023. The increase was primarily due to higher net earnings and, to a lesser extent, net cash changes in non-tax operating assets and liabilities. This increase was partially offset by timing of tax-related payments.
Previous wording
Cash used in investing activities was $637.3 million for the six months ended June 30, 2024, compared to $627.7 million for the six months ended June 30, 2023. The change was primarily associated with increased capital expenditures of $15.6 million primarily related to new restaurant development. This increase was partially offset by a $6.0 million decrease in investment purchases net of investment maturities.
Current wording
Cash used in investing activities was $701.5 million for the nine months ended September 30, 2024, compared to $794.0 million for the nine months ended September 30, 2023. The change was primarily associated with a $124.4 million decrease in investment purchases net of investment maturities. This was partially offset by increased capital expenditures of $31.9 million primarily related to new restaurant development.
Previous wording
Cash used in financing activities was $245.4 million for the six months ended June 30, 2024, compared to $289.1 million for the six months ended June 30, 2023. The change was primarily due to decreased treasury stock repurchases of $49.4 million.
Current wording
Cash used in financing activities was $735.0 million for the nine months ended September 30, 2024, compared to $505.4 million for the nine months ended September 30, 2023. The change was primarily due to increased repurchases of common stock of $225.3 million.