How Has Negative PR Affected Chipotle’s Operating Efficiency?
- In 2014, for every dollar spent in operating expenses (SG&A adjusted for D&A and share based compensation), Chipotle Mexican Grill (NYSE: CMG) generated $2.47 in revenues.
- Affected by the E.coli controversy toward the end of 2015, Chipotle saw a slow down in its revenue growth rate. In addition, it had to increase its operating expenses to lure customers back to its restaurants.
- Subsequently, revenue generated for every dollar spent on operating activities fell to $2.40 in 2015.
- We expect this fall to continue in 2016, to below $2.30, as Chipotle spends heavily on marketing and promotional activities, along with higher remuneration for its employees.
- Going forward, we expect revenue generated for every dollar spent on operating activities to recover as comparable store sales improve due to the boost in consumer perception, which can potentially bring customers back to its stores. With frequent visits and higher spending by customers, Chipotle can increase its revenue relative to its expenses. Therefore, we estimate the metric to increase to $2.32 by 2018.
Have more questions about Chipotle Mexican Grill (NYSE: CMG)? See the links below:
- Down, But Not Out: Chipotle Returns To Profitability In Q2’16, Despite Weakness In Top Line
- Chipotle Mexican Grill Q2 FY’16 Earnings Preview: Recovery In Top-line Likely To Be Weak
- Chipotle Mexican Grill Struggles in Q1 FY’16 As Last Year’s E.coli Controversy Impacts Comparable Sales
- 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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