Chipotle Mexican Grill (CMG) opened its first restaurant in 1993, became a subsidiary of McDonald’s (MCD) in 1998, and was spun off in a public offering in 2006, recalls John Staszak, an analyst with Argus Research, a leading independent Wall Street research firm.
Chipotle restaurants offer quick service, but maintain traditional cooking methods and utilize high-quality ingredients. The company has a tightly focused menu, but store design and decor vary by location. The company has been expanding rapidly in recent years as interest in Southwestern food has spread throughout the U.S.
Chipotle reported fourth-quarter results on February 2 after the close. Revenues rose 11.6% year-over-year to nearly $1.61 billion but missed the consensus estimate by $2.3 million. The company opened 61 new restaurants and closed two locations, raising the store count to 2,750. Same-store sales rose 5.7% in 4Q20, below the consensus forecast, which called for an increase of 5.9%.
Same-store sales were helped by a 177% increase in digital orders, which now comprise 49% of revenue — helped by third-party delivery aggregators like Grubhub and Uber Eats. Same-store sales were strong every month in the fourth quarter, with December being the strongest mont.
For all of 2020, revenue rose 7% to $6.0 billion, reflecting a 1.8% increase in same-store sales and the opening of 161 new restaurants, up from 140 in 2019. Full-year earnings fell to $10.23 per share from $14.05 in 2019.
We are raising our 2021 EPS estimate to $22.50 from $21.90 and setting a 2022 estimate of $29.00. Our estimates reflect continued growth in digital orders and carefully managed expenses.
In 2021, we expect comps to continue to recover and market share gains, offset in part by higher labor costs and investments in marketing and technology. Our long-term EPS growth rate forecast is 25%, up from a prior 20%.
We think that Chipotle possesses a healthy balance sheet ($1.1 billion in liquidity in 4Q20) and robust mobile ordering and delivery platforms that will help it to recover as the economy reopens. While some consumers may be put off by Chipotle’s high prices during a period of economic weakness, we expect its strong brand to continue to attract customers, helping it to endure dining-room closures.
Our long-term rating is "buy". We remain confident that Chipotle can achieve its long-term goals of mid-single-digit comps, high single-digit revenue growth, and mid-teens operating margins.
