Chipotle (CMG) Last Update 2/11/21
Related: KO MCD PEP SBUX
% of Stock Price
Revenue
Gross Profits
Free Cash Flow
Chipotle
STOCK PRICE
DIVISION
% of STOCK PRICE
Net Debt
6.0% $105
TOTAL
100%
$1749
$1.64Mil
Yours
Trefis Price
N/A
$1,531
Market
 
Top Drivers for Period
Key Drivers
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TREFIS Analysis


Trefis Report
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RECENT NEWS AND ANALYSIS

Potential upside & downside to trefis price

Chipotle Company

VALUATION HIGHLIGHTS

  1. Company Operated Restaurants constitute 100% of the Trefis price estimate for Chipotle's stock.

WHAT HAS CHANGED?

Impact of Coronavirus

Restaurant business has suffered as states and countries are on lockdown. People are not meeting friends and colleagues or going out with family for breakfast, drinks, lunch, or dinner. Restaurants and food outlets are operating in the take-out-only mode, and many are closed. Besides lower demand, the supply chain across the world is suffering, which will also weigh on sales.

Latest Earnings

For FY 2020 Comparable sales increased 1.8% y-o-y. The company opened 161 new restaurants for the year. Revenue was recorded at $6 billion, up 7.1% y-o-y. Digital sales grew 174.1% and accounted for 46.2% of sales. Restaurant-level operating margin was 17.4%, a decrease of 310 bps. Diluted EPS was $12.52, which included an income tax benefit of $3.79, partially offset by a $2.00 after-tax impact from expenses related to legal, corporate restructuring, restaurant closure costs, and certain other costs, a 1.1% increase from $12.38.

Continual Focus On Digital Initiatives

Chipotle is maintaining its focus on digital initiatives, and the company will market this capability further as it sees tremendous growth in mobile ordering. Due to the coronavirus pandemic the digital initiatives were put to test and the company achieved 61% of the sales in Q2 2020 digitally.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Chipotle's value that present opportunities for upside or downside to the current Trefis price estimate for Chipotle:

Company Operated Restaurants

Number of Restaurants : Currently in the coronavirus pandemic the company's new restaurant addition has taken a hit and is at a slow pace till things get clearer.

Average Revenue Per Restaurant : We expect the company's revenues to grow at a steady pace over our forecast period, with average restaurant sales growing at around 3% over our forecast period.

For additional details, select a driver above or select a division from the interactive Trefis split for Chipotle at the top of the page.

BUSINESS SUMMARY

Chipotle Mexican Grill is a chain of restaurants operating in the casual dining segment, which specializes in serving Mexican cuisine. As of June 30, 2020, the company operated 2,669 restaurants, almost all of which are located within the U.S. All the restaurants are company-operated with no franchises.

Chipotle's menu comprises a Mexican fare with a few things that can be mixed and matched with various sauces and ingredients such as salsa, guacamole, cheese, and lettuce, to make one's dishes. The menu primarily consists of Tacos, Burritos, Salads, and Burrito Bowls (Burrito without the Tortilla).

Chipotle operates on the "Food with Integrity" principle, wherein it offers naturally raised pork, chicken, and beef. Naturally raised implies that the animals are raised in open pastures and are fed on a purely vegetarian diet without any added hormones or antibiotics.

Chipotle's objective is to provide a fine-dining experience in a quick-service setup and to provide quality food and ambiance without having the customer wait too long. Some Chipotle restaurants can serve up to 300 customers an hour.

Chipotle competes with restaurants in the casual dining segment such as Applebee's, Qdoba, Taco Bell, and Chili's, among others. It also competes with fast-food restaurants such as McDonald's, Burger King, Subway, and KFC.

SOURCES OF VALUE

Chipotle's business is wholly dependent on company-operated restaurants, which explains the significance of this division to its stock.

Higher average spend per customer than competitors

Chipotle enjoys a higher average spend per customer than most of its competitors, given its high quality of food. For example, in McDonald's, the average spend per customer is around $4, whereas the corresponding figure in Chipotle is about $11-12. The company has successfully marketed itself as a restaurant serving natural, hygienic, and organic food in an upscale ambiance, for which the consumers are often ready to pay a slight premium.

Another reason why the company enjoys a higher average spend per customer is that it has restaurants only in developed countries, where the average spend is usually higher than in developing countries. Most of the fast-food restaurant chains have a mix of restaurants in developed and developing countries, which has a lowering effect on the overall spend per customer.

KEY TRENDS

Organic and healthier food gaining importance in the U.S.

Consumers have become more health-conscious, and there is an increase in demand for natural and healthier food. Using its 'Food with Integrity' campaign, Chipotle has aggressively marketed itself as a restaurant using only naturally raised meat. Taking cues from Chipotle, an increasing number of restaurant chains are adding all-natural products to their menu. Wendy's started offering upscaled items on its menu last year. Moreover, its restaurant remodeling initiative is inspired by Chipotle.