Chipotle Mexican Grill, Inc. (NYSE:CMG) recently unveiled its third-quarter 2023 financial results, and both earnings and revenues exceeded the Zacks Consensus Estimate, marking growth compared to the previous year. This marks the third consecutive quarter where earnings surpassed expectations, leading to a 3.8% rise in the company’s stock during after-hours trading on October 26.
Q3 Earnings & Revenue Overview
In the third quarter, Chipotle reported adjusted earnings per share (EPS) of $11.36, beating the Zacks Consensus Estimate of $10.46. This figure marked a 19.5% increase from the year-ago quarter’s $9.51.
Quarterly revenues stood at $2,471.9 million, surpassing the consensus estimate of $2,469 million. The top-line growth of 11.3% year-over-year was driven by robust comparable restaurant sales and the opening of new restaurants. During this period, Chipotle introduced 62 new restaurants, including 54 locations featuring a Chipotlane. An impressive 36.6% of food and beverage revenues came from digital sales.
Comparable restaurant sales in the third quarter experienced a 5% year-over-year increase, down from 7.4% in the previous quarter but exceeding the estimated 3.6%.
Costs, Operating Highlights, & Net Income
Food, beverage, and packaging costs accounted for 29.7% of revenues during the third quarter of 2023, a decrease of 10 basis points compared to the previous year. This cost improvement was primarily driven by menu price increases, which offset inflation in several food costs, notably beef and queso. Predictions had placed this metric at 30%.
The restaurant-level operating margin reached 26.3% in the reported quarter, up from 25.3% a year ago. This improvement was mainly due to sales leverage, though it was partially offset by higher food costs and wage inflation, exceeding the anticipated 25.1%.
The adjusted net income for the quarter amounted to $314.3 million, reflecting an 18.2% increase from the previous year.
Balance Sheet
As of September 30, 2023, Chipotle reported cash and cash equivalents of $602.3 million, compared to $504.9 million as of June 30, 2023. Inventory for the same period totaled $40.2 million, an increase from the $36 million reported as of June 30, 2023. Goodwill, as a percentage of total assets, reached 0.3% by the end of the second quarter of 2023.
During the third quarter, CMG repurchased $226.3 million worth of stock at an average price of $1,913.98.
Outlook
For the fourth quarter of 2023, management anticipates mid to high-single-digit growth in comparable restaurant sales (comps). CMG also expects to open 255-285 restaurants in 2023 and projects a 25-27% tax rate for the same year. Looking ahead to 2024, the company forecasts the opening of 285-315 new restaurants.
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