Overview for the fourth quarter of 2017 as compared to the fourth quarter of 2016:
- Revenue increased 7.3% to
$1.1 billion - Comparable restaurant sales increased 0.9% for the quarter
- Restaurant level operating margin was 14.9%, an increase from 13.5%
- Net income was
$43.8 million , an increase from$16.0 million - Diluted earnings per share was
$1.55 , including a benefit of$0.21 per share resulting from changes in U.S. tax law, compared to$0.55 in the fourth quarter of 2016 - Opened 38 new restaurants
Overview for the year ended
- Revenue increased 14.7% to
$4.5 billion - Comparable restaurant sales increased 6.4%
- Restaurant level operating margin was 16.9%, an increase from 12.8%
- Net income was
$176.3 million , an increase from net income of$22.9 million - Diluted earnings per share was
$6.17 , including a benefit of$0.21 per share resulting from changes in U.S. tax law, compared to$0.77 in 2016 - Opened 183 new restaurants and closed or relocated 25, including 15
ShopHouse Southeast Asian Kitchen Restaurants
“During 2017, we have made considerable changes around leadership, operations, and long-term planning and it is clear that, while there is still work to be done, we are starting to see some success,” said
Fourth quarter 2017 results
Revenue for the quarter was
Food costs were 34.2% of revenue, a decrease of 110 basis points compared to the fourth quarter of 2016. The decrease was driven by the benefit of the menu price increases, cost savings initiatives related to paper and packaging products, and relief in avocado prices during the fourth quarter of 2017 compared to the fourth quarter of 2016.
Restaurant level operating margin was 14.9% in the quarter, an improvement from 13.5% in the fourth quarter of 2016. The improvement was driven primarily by decreased promotional activity and lower food, beverage and packaging costs as a percent of revenue.
General and administrative expenses were 5.2% of revenue for the fourth quarter of 2017, a decrease of 110 basis points over the fourth quarter of 2016. In dollar terms, general and administrative expenses decreased compared to the fourth quarter of 2016 due to decreased non-cash stock-based compensation expense and lower legal costs.
Net income for the fourth quarter of 2017 was
Full year 2017 results
Revenue for the full year 2017 was
We opened 183 new restaurants during the year and closed or relocated 25 (including the closure of 15
Food costs were 34.3% of revenue, a decrease of 70 basis points as compared to the prior year. The decrease was driven by the benefit of the menu price increases taken in select restaurants during the second and fourth quarters of 2017, combined with bringing the preparation of lettuce and bell peppers back into our restaurants after using pre-cut produce during portions of 2016, and cost savings initiatives related to paper and packaging products. These decreases were partially offset by higher avocado prices.
Restaurant level operating margin was 16.9% for the full year 2017, an improvement from 12.8% in the prior year. The improvement was driven by sales leverage, including the benefit of menu price increases, decreased marketing and promotional spend and labor efficiencies, partially offset by higher wages paid to crew and managers. Marketing and promotional expenses were 3.5% of revenue during 2017, compared to 5.1% of revenue during 2016.
General and administrative expenses were 6.6% of revenue for the full year of 2017, a decrease of 50 basis points over the prior year, primarily as a result of sales leverage. In dollar terms, general and administrative costs increased compared to the prior year primarily due to recording a liability of
Our 2017 effective tax rate was 36.1%, a decrease of 4.7% from 2016, due to the enactment of the Tax Cuts and Jobs Act, and a lower state tax rate. This decrease was partially offset by federal credits on overall higher pre-tax operating income. The Tax Cuts and Jobs Act reduced the federal corporate income tax rate to 21% starting in 2018. As a result, we recognized a
Net income for the full year 2017 was
With regard to the impact of the Tax Cuts and Jobs Act,
Outlook
For 2018, management is expecting the following:
- Comparable restaurant sales increases in the low single digits
- 130 - 150 new restaurant openings
- An estimated effective tax rate for the full year of between 30.0% and 31.0%, which includes an underlying effective tax rate of about 27% to 28%, plus the effect of prior year employee equity plans which may either expire without vesting (resulting in no tax deduction), or vest at lower realized values (resulting in a lower tax deduction). While we expect future underlying effective tax rates in the 27% to 28% range, these rates will be further impacted by volatility due to accounting for taxes associated with previous and future stock-based compensation awards as well as a deferred tax asset related to market-based performance stock awards which may not vest.
Definitions
The following definitions apply to these terms as used throughout this release:
Comparable restaurant sales, or sales comps, represent the change in period-over-period sales for restaurants in operation for at least 13 full calendar months.
Restaurant level operating margin represents total revenue less restaurant operating costs, expressed as a percent of total revenue.
Conference Call
Chipotle will host a conference call to discuss the fourth quarter and full year 2017 financial results on
The conference call can be accessed live over the phone by dialing 1-877-451-6152 or for international callers by dialing 1-201-389-0879. The call will be webcast live from the company's website on the investor relations page at ir.chipotle.com. An archived webcast will be available approximately one hour after the end of the call.
About Chipotle
Forward-Looking Statements
Certain statements in this press release, including statements under the heading “Outlook” of our expected comparable restaurant sales, number of new restaurant openings, and effective tax rate for 2018, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. We use words such as “anticipate”, “believe”, “could”, “should”, “estimate”, “expect”, “intend”, “may”, “predict”, “project”, “target”, and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on information available to us as of the date any such statements are made and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include, but are not limited to, the following: the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in consumers’ perceptions of our brand, including as a result of actual or rumored food-borne illness incidents or other negative publicity, the impact of competition, including from sources outside the restaurant industry, decreased overall consumer spending, or our possible inability to increase menu prices or realize the benefits of menu price increases; the risk of food-borne illnesses and other health concerns about our food or dining out generally; factors that could affect our ability to achieve and manage our planned expansion, such as the availability of a sufficient number of suitable new restaurant sites and the availability of qualified employees; the performance of new restaurants and their impact on existing restaurant sales; the potential for increased labor costs or difficulty training and retaining qualified employees, including as a result of market pressures, enhanced food safety procedures in our restaurants, or new regulatory requirements; increases in the cost of food ingredients and other key supplies or higher food costs due to changes in supply chain protocols; risks related to our marketing and advertising strategies, which may not be successful and may expose us to liabilities; supply chain risks; risks relating to our expansion into new markets, including outside the U.S., or non-traditional restaurant sites; the impact of federal, state or local government regulations relating to our employees, our restaurant design, or the sale of food or alcoholic beverages; risks associated with our Food With Integrity philosophy, including supply shortages and potential liabilities from advertising claims and other marketing activities related to Food With Integrity; security risks associated with the acceptance of electronic payment cards or electronic storage and processing of confidential customer or employee information; risks relating to litigation, including possible governmental actions related to food-borne illness incidents, as well as class action litigation regarding employment laws, advertising claims or other matters; risks relating to our insurance coverage and self-insurance; risks regarding our ability to protect our brand and reputation; risks associated with our reliance on certain information technology systems; risks related to our ability to effectively manage our growth; risks associated with our pending leadership change and our dependence on key personnel; and other risk factors described from time to time in our
|
Chipotle Mexican Grill, Inc. |
||||||||||||||
| Three months ended December 31, | ||||||||||||||
| 2017 | 2016 | |||||||||||||
| Revenue | $ | 1,110,100 | 100.0 | % | $ | 1,034,560 | 100.0 | % | ||||||
| Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||||||||||||
| Food, beverage and packaging | 379,914 | 34.2 | 365,612 | 35.3 | ||||||||||
| Labor | 305,428 | 27.5 | 284,250 | 27.5 | ||||||||||
| Occupancy | 84,650 | 7.6 | 76,489 | 7.4 | ||||||||||
| Other operating costs | 175,038 | 15.8 | 168,563 | 16.3 | ||||||||||
| General and administrative expenses | 57,690 | 5.2 | 65,069 | 6.3 | ||||||||||
| Depreciation and amortization | 41,442 | 3.7 | 38,072 | 3.7 | ||||||||||
| Pre-opening costs | 2,577 | 0.2 | 4,118 | 0.4 | ||||||||||
| Loss on disposal and impairment of assets | 3,332 | 0.3 | 1,837 | 0.2 | ||||||||||
| Total operating expenses | 1,050,071 | 94.6 | 1,004,010 | 97.0 | ||||||||||
| Income from operations | 60,029 | 5.4 | 30,550 | 3.0 | ||||||||||
| Interest and other income, net | 1,437 | 0.1 | 588 | 0.1 | ||||||||||
| Income before income taxes | 61,466 | 5.5 | 31,138 | 3.0 | ||||||||||
| Provision for income taxes | (17,673 | ) | (1.6 | ) | (15,163 | ) | (1.5 | ) | ||||||
| Net income | $ | 43,793 | 3.9 | % | $ | 15,975 | 1.5 | % | ||||||
| Earnings per share: | ||||||||||||||
| Basic | $ | 1.56 | $ | 0.55 | ||||||||||
| Diluted | $ | 1.55 | $ | 0.55 | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 28,158 | 28,903 | ||||||||||||
| Diluted | 28,164 | 29,003 | ||||||||||||
|
Chipotle Mexican Grill, Inc. |
||||||||||||||
| Year ended December 31, | ||||||||||||||
| 2017 | 2016 | |||||||||||||
| (unaudited) | ||||||||||||||
| Revenue | $ | 4,476,412 | 100.0 | % | $ | 3,904,384 | 100.0 | % | ||||||
| Restaurant operating costs (exclusive of depreciation and amortization shown separately below): | ||||||||||||||
| Food, beverage and packaging | 1,535,428 | 34.3 | 1,365,580 | 35.0 | ||||||||||
| Labor | 1,205,992 | 26.9 | 1,105,001 | 28.3 | ||||||||||
| Occupancy | 327,132 | 7.3 | 293,636 | 7.5 | ||||||||||
| Other operating costs | 651,644 | 14.6 | 641,953 | 16.4 | ||||||||||
| General and administrative expenses | 296,388 | 6.6 | 276,240 | 7.1 | ||||||||||
| Depreciation and amortization | 163,348 | 3.6 | 146,368 | 3.7 | ||||||||||
| Pre-opening costs | 12,341 | 0.3 | 17,162 | 0.4 | ||||||||||
| Loss on disposal and impairment of assets | 13,345 | 0.3 | 23,877 | 0.6 | ||||||||||
| Total operating expenses | 4,205,618 | 94.0 | 3,869,817 | 99.1 | ||||||||||
| Income from operations | 270,794 | 6.0 | 34,567 | 0.9 | ||||||||||
| Interest and other income, net | 4,949 | 0.1 | 4,172 | 0.1 | ||||||||||
| Income before income taxes | 275,743 | 6.2 | 38,739 | 1.0 | ||||||||||
| Provision for income taxes | (99,490 | ) | (2.2 | ) | (15,801 | ) | (0.4 | ) | ||||||
| Net income | $ | 176,253 | 3.9 | % | $ | 22,938 | 0.6 | % | ||||||
| Earnings per share: | ||||||||||||||
| Basic | $ | 6.19 | $ | 0.78 | ||||||||||
| Diluted | $ | 6.17 | $ | 0.77 | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||||
| Basic | 28,491 | 29,265 | ||||||||||||
| Diluted | 28,561 | 29,770 | ||||||||||||
|
Chipotle Mexican Grill, Inc. |
||||||||
| December 31, | ||||||||
| 2017 | 2016 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 184,569 | $ | 87,880 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $0 and $259 as of December 31, 2017 and 2016, respectively | 40,453 | 40,451 | ||||||
| Inventory | 19,860 | 15,019 | ||||||
| Prepaid expenses and other current assets | 50,918 | 44,080 | ||||||
| Income tax receivable | 9,353 | 5,108 | ||||||
| Investments | 324,382 | 329,836 | ||||||
| Total current assets | 629,535 | 522,374 | ||||||
| Leasehold improvements, property and equipment, net | 1,338,366 | 1,303,558 | ||||||
| Long term investments | - | 125,055 | ||||||
| Other assets | 55,852 | 53,177 | ||||||
| Goodwill | 21,939 | 21,939 | ||||||
| Total assets | $ | 2,045,692 | $ | 2,026,103 | ||||
| Liabilities and shareholders' equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 82,028 | $ | 78,363 | ||||
| Accrued payroll and benefits | 82,541 | 76,301 | ||||||
| Accrued liabilities | 159,324 | 127,129 | ||||||
| Total current liabilities | 323,893 | 281,793 | ||||||
| Deferred rent | 316,498 | 288,927 | ||||||
| Deferred income tax liability | 814 | 18,944 | ||||||
| Other liabilities | 40,042 | 33,946 | ||||||
| Total liabilities | 681,247 | 623,610 | ||||||
| Shareholders' equity: | ||||||||
| Preferred stock, $0.01 par value, 600,000 shares authorized, no shares issued as of December 31, 2017 and 2016, respectively | - | - | ||||||
| Common stock $0.01 par value, 230,000 shares authorized, and 35,852 and 35,833 shares issued as of December 31, 2017 and 2016, respectively | 359 | 358 | ||||||
| Additional paid-in capital | 1,305,090 | 1,238,875 | ||||||
| Treasury stock, at cost, 7,826 and 7,019 common shares at December 31, 2017 and 2016, respectively | (2,334,409 | ) | (2,049,389 | ) | ||||
| Accumulated other comprehensive income (loss) | (3,659 | ) | (8,162 | ) | ||||
| Retained earnings | 2,397,064 | 2,220,811 | ||||||
| Total shareholders' equity | 1,364,445 | 1,402,493 | ||||||
| Total liabilities and shareholders' equity | $ | 2,045,692 | $ | 2,026,103 | ||||
|
Chipotle Mexican Grill, Inc. |
||||||||
| Year ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| (unaudited) | ||||||||
| Operating activities | ||||||||
| Net income | $ | 176,253 | $ | 22,938 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 163,348 | 146,368 | ||||||
| Deferred income tax (benefit) provision | (18,026 | ) | (14,207 | ) | ||||
| Loss on disposal and impairment of assets | 13,345 | 23,877 | ||||||
| Bad debt allowance | 214 | (262 | ) | |||||
| Stock-based compensation expense | 65,255 | 64,166 | ||||||
| Excess tax benefit on stock-based compensation | - | (1,320 | ) | |||||
| Other | (218 | ) | (604 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (140 | ) | (1,923 | ) | ||||
| Inventory | (5,250 | ) | (91 | ) | ||||
| Prepaid expenses and other current assets | (6,710 | ) | (4,259 | ) | ||||
| Other assets | (2,587 | ) | (4,855 | ) | ||||
| Accounts payable | 10,908 | (6,734 | ) | |||||
| Accrued liabilities | 38,574 | 33,491 | ||||||
| Income tax payable/receivable | (4,173 | ) | 54,340 | |||||
| Deferred rent | 29,996 | 37,030 | ||||||
| Other long-term liabilities | 6,316 | 1,287 | ||||||
| Net cash provided by operating activities | 467,105 | 349,242 | ||||||
| Investing activities | ||||||||
| Purchases of leasehold improvements, property and equipment | (216,777 | ) | (258,842 | ) | ||||
| Purchases of investments | (199,801 | ) | - | |||||
| Maturities of investments | 330,000 | 45,000 | ||||||
| Proceeds from sale of investments | - | 540,648 | ||||||
| Net cash provided by (used in) investing activities | (86,578 | ) | 326,806 | |||||
| Financing activities | ||||||||
| Acquisition of treasury stock | (285,920 | ) | (837,655 | ) | ||||
| Excess tax benefit on stock-based compensation | - | 1,320 | ||||||
| Stock plan transactions and other financing activities | 26 | 52 | ||||||
| Net cash used in financing activities | (285,894 | ) | (836,283 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 2,056 | 110 | ||||||
| Net change in cash and cash equivalents | 96,689 | (160,125 | ) | |||||
| Cash and cash equivalents at beginning of year | 87,880 | 248,005 | ||||||
| Cash and cash equivalents at end of year | $ | 184,569 | $ | 87,880 | ||||
|
Chipotle Mexican Grill, Inc. |
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| For the three months ended | |||||||||||||||||||||||||
| Dec. 31, | Sep. 30 | Jun. 30, | Mar. 31, | Dec. 31, | |||||||||||||||||||||
| 2017 | 2017 | 2017 | 2017 | 2016 | |||||||||||||||||||||
| Number of restaurants opened | 38 | 38 | 50 | 57 | 72 | ||||||||||||||||||||
| Restaurant relocations/closures | (4 | ) | (3 | ) | (2 | ) | (16 | ) | - | ||||||||||||||||
| Number of restaurants at end of period | 2,408 | 2,374 | 2,339 | 2,291 | 2,250 | ||||||||||||||||||||
| Average restaurant sales | $ | 1,940 | $ | 1,948 | $ | 1,957 | $ | 1,931 | $ | 1,868 | |||||||||||||||
| Comparable restaurant sales increase (decrease) | 0.9 | % | 1.0 | % | 8.1 | % | 17.8 | % | (4.8 | %) | |||||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20180206006270/en/
Source:
Chipotle Mexican Grill, Inc.
Mark Alexee, 303-605-1042
malexee@chipotle.com