Chipotle Mexican Grill Q2 FY’16 Earnings Preview: Recovery In Top-line Likely To Be Weak
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1) Chipotle’s top-line suffered in Q1’16 due to the continued impact of the E.coli controversy.
- Food, beverage, and packaging costs declined the most, at 35% y-o-y.
- Average spend per visit fell 8% y-o-y.
- Comparable restaurant sales were down by a massive 30% y-o-y.
2) Sales recovery initiatives undertaken
- Aggressive marketing campaign, targeting all of U.S. and Canada.
- Introduction of new menu items like “Chorizo” and launch of a reward program.
- Strengthening its digital ordering capabilities.
- Implemented a food safety protocol.
3) Recovery underway
- Improvement seen in comparable sales in the month of April due to Easter holidays.
- Improvement in key measures such as admiration, consideration, first-time visits, and food quality.
- Q2, seasonally a strong quarter for the company.
- Marketing costs expected to be 3% – 4% of sales in the upcoming quarters.
- Transitioning its traffic driving initiatives from freebies to purchase-oriented.
4) Industry-wide comparable sales continue to be weak
- Same store traffic at -3.5% in April; worst in 2 years.
- Comp sales at -0.3%, while same store traffic at -2.7% in May.
Have more questions about Chipotle Mexican Grill (NYSE: CMG)? See the links below:
- Chipotle Mexican Grill FY 2015 Earnings Review: E.Coli Scandal Hinders Top-line Growth
- What’s Chipotle Mexican Grill’s Fundamental Value Based On Expected 2016 Results?
- What Is Chipotle Mexican Grill’s Revenue and EBITDA Bridge?
- How Has Chipotle Mexican Grill’s Operating Metrics Changed Over 2011-2015?
- Where Will Chipotle Mexican Grill’s Revenue and EBITDA Growth Come From Over The Next Three Years?
- Chipotle Mexican Grill Q1 FY’16 Earnings Preview: E.coli Scandal Might Still Impact Top-line Growth
Notes:
1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Chipotle Mexican Grill
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