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CHIPOTLE ANNOUNCES FOURTH QUARTER AND FULL YEAR 2021 RESULTS
Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its fourth quarter and fiscal year ended December 31, 2021. Chipotle reported Q4 adjusted EPS of $5.58 versus the consensus estimate of $5.26. The company reported Q4 revenue of $2B versus the consensus estimate of $1.96B. Comparable restaurant sales increased 15.2%.
Fourth quarter highlights, year over year:
- Total revenue increased 22.0% to $2.0 billion
- Comparable restaurant sales increased 15.2%
- Digital sales grew 3.8% and accounted for 41.6% of sales
- Operating margin was 8.1%, an increase from 7.3%
- Restaurant level operating margin was 20.2%1, an increase of 70 basis points
- Diluted earnings per share was $4.69, compared to $6.69. The fourth quarter of 2020 included an income tax benefit of $3.77. Adjusted diluted earnings per share, which excluded an $0.89 after-tax impact from expenses related to certain legal proceedings, the 2018 performance share (“PSU”) COVID-19 related modification, corporate restructuring, and restaurant asset impairment and closure costs, was $5.58, a 60.3% increase from $3.48.1
- Opened 78 new restaurants
Full year 2021 highlights, year over year:
- Total revenue increased 26.1% to $7.5 billion
- Comparable restaurant sales increased 19.3%
- Digital sales grew 24.7% and accounted for 45.6% of sales
- Operating margin was 10.7%, an increase from 4.8%
- Restaurant level operating margin was 22.6%1, an increase of 520 basis points
- Diluted earnings per share was $22.90, an 82.9% increase from $12.52. Adjusted diluted earnings per share, which excluded a $2.52 after-tax impact from expenses related to the 2018 PSU COVID-19 related modification, certain legal proceedings, corporate restructuring, restaurant asset impairment and closure costs, and certain other costs, was $25.42, a 136.9% increase from $10.73.1
- Opened 215 new restaurants
“2021 was an outstanding year for Chipotle, highlighting the strength and resiliency of our brand. Together, we accomplished many incredible things as our passionate employees remained dedicated to delivering excellent guest experiences, aligned with our purpose and values,” said Brian Niccol, Chairman and Chief Executive Officer, Chipotle. “Moving forward, we believe expanding access and convenience through our digital ecosystem, accelerating unit growth, and continuing to develop and support our restaurant employees, will put us in a much stronger competitive position.”
Development Update:
Based on the success of small-town locations that are delivering unit economics at or better than traditional Chipotle locations, we provide the following update to our long-term development opportunity:
Over time, we believe there can be at least 7,000 Chipotle restaurants in North America, up from the prior goal of 6,000 restaurants.
Given the healthy and improving cash on cash returns, we are building a real estate pipeline that will allow us to accelerate unit growth to be in the range of 8% to 10% per year, with greater than 80% of new restaurants having a Chipotlane.
COVID-19 and Liquidity Update:
Given the resurgence in COVID-19 cases during the fourth quarter due to the Omicron variant, the health and well-being of our employees and guests remains our top priority. Beyond the investments made in our people, restaurants, and supply chain, we are closely following the recommendations of the CDC and local health departments. We have implemented and enhanced numerous protocols that give our employees and guests confidence that Chipotle remains steadfast in our commitment to keep them safe as in-restaurant ordering and dining increases.
As of December 31, 2021, Chipotle continues to maintain a strong financial position with $1.4 billion in cash, investments and restricted cash, and no debt. We also have access to a $500 million untapped credit facility. Our financial strength gives us the opportunity to make on-going strategic investments in our people, business, and communities, which we believe will benefit us for years to come.
Results for the three months ended December 31, 2021:
Total revenue in the fourth quarter was $2.0 billion, an increase of 22.0% compared to the fourth quarter of 2020. The increase in total revenue was driven by a 15.2% increase in comparable restaurant sales and new restaurant openings. Comparable restaurant sales were fairly consistent in each month of the fourth quarter due to a combination of factors including healthy demand for Smoked Brisket, strength in digital sales, and the benefit of menu price increases. Comparable restaurant sales began to moderate in the back half of December as the number of Omicron cases spiked. This trend intensified through January 2022, which also included challenging weather across the country. Assuming the effects of the pandemic continue to subside, we expect first quarter 2022 comparable restaurant sales to be in the mid to high single digits range.
Digital sales grew 3.8% year over year to $811.3 million and represented 41.6% of sales. About half of the digital sales were from order ahead transactions as guests appreciate both the convenience and value offered by this channel, as well as the added convenience of more Chipotlanes.
We opened 78 new restaurants during the fourth quarter with 67 (or 86%) including a Chipotlane. These formats continue to perform very well and are helping enhance guest access and convenience, as well as increase new restaurant sales, margins, and returns.
Food, beverage and packaging costs in the fourth quarter were 31.6% of total revenue, an increase of 60 basis points compared to the fourth quarter of 2020. The increase was due primarily to elevated inflation on beef and freight, and to a lesser extent, avocado costs that more than offset the leverage from menu price increases.
Restaurant level operating margin was 20.2%, an increase from 19.5% in the fourth quarter of 2020. The improvement was driven primarily by leverage from comparable restaurant sales and menu price increases, partially offset by wage inflation and higher commodity costs largely due to beef and freight.
General and administrative expenses for the fourth quarter were $159.8 million on a GAAP basis, or $132.8 million2 on a non-GAAP basis, excluding $18.0 million related to the proposed settlement of legal matters, $7.6 million for a COVID-19 related modification made in December 2020 to the 2018 performance shares, and $1.3 million related to transformation expenses, restaurant closure costs and certain other costs. GAAP and non-GAAP general and administrative expenses for the fourth quarter of 2021 also include $99.9 million of underlying general and administrative expenses, $29.7 million of non-cash stock compensation, $1.8 million related to higher bonus accruals as well as payroll taxes on equity vesting and stock option exercises, and $1.4 million related to the upcoming all-manager conference.
The GAAP effective income tax rate was 20.3% in the fourth quarter of 2021, compared to negative 62.2% in the fourth quarter of 2020. The increase in the tax rate was primarily due to the tax benefit recorded last year for the 2020 federal net operating loss generated and carried back to prior years. This was partially offset by a net reduction in tax expense mostly related to the write-off of uncertain tax position reserves and more equity vesting and exercises in the fourth quarter of 2021. On a non-GAAP basis, the 2021 fourth quarter effective income tax rate was 18.7%2.
Net income for the fourth quarter of 2021 was $133.5 million, or $4.69 per diluted share, a decrease from $191.0 million, or $6.69 per diluted share, which included an income tax benefit of $3.77 per diluted share, in the fourth quarter of 2020. Excluding the impact of legal expenses, modification expenses related to our 2018 PSUs, corporate restructuring, and restaurant asset impairment, adjusted net income for the fourth quarter 2021 was $159.1 million and adjusted diluted earnings per share was $5.58.
During the quarter, our Board of Directors approved the investment of up to an additional $200.0 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, $240.9 million was available as of December 31, 2021. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased $168.9 million of stock at an average price per share of $1,750 during the fourth quarter.
Results for the full year ended December 31, 2021:
Total revenue for 2021 was $7.5 billion, an increase of 26.1% compared to 2020. The increase in total revenue was driven by a 19.3% increase in comparable restaurant sales and new restaurant openings.
Digital sales grew 24.7% year over year to $3.4 billion and represented 45.6% of sales. About half of the digital sales were from order ahead transactions as guests better understand the value offered by this channel, as well as the added convenience of more Chipotlanes.
We opened 215 new restaurants during the year, bringing the total restaurant count at year-end to 2,966. Of the 215 new restaurants opened during the year, 174 (or 81%) included a Chipotlane. We had a total of 355 Chipotlanes as of year-end.
Food, beverage and packaging costs were 30.6% of total revenue, a decrease of 170 basis points compared to 2020. The decrease was largely driven by leverage from menu price increases, which was partially offset by higher freight and beef costs.
Restaurant level operating margin was 22.6%, an increase from 17.4% in 2020. The improvement was driven primarily by leverage from comparable restaurant sales and menu price increases, partially offset by wage inflation, higher commodity inflation primarily from freight and beef, as well as increased delivery expenses.
General and administrative expenses were $606.9 million on a GAAP basis, or $518.0 million2 on a non-GAAP basis, excluding $63.1 million for a COVID-19 related modification made in December 2020 to the 2018 performance shares, $20.1 million related to various legal matters, and $5.6 million related to transformation expenses, restaurant closure costs and certain other costs. GAAP and non-GAAP general and administrative expenses for full year 2021 also include $380.8 million of underlying general and administrative expenses, $109.5 million of non-cash stock compensation, $24.9 million related to higher bonus accruals as well as payroll taxes on equity vesting and stock option exercises, and $2.9 million related to the upcoming all-manager conference.
The GAAP effective income tax rate was 19.7% in 2021, compared to negative 21.1% in 2020. The increase in the tax rate was primarily due to the tax benefit booked last year for the 2020 federal net operating loss generated and carried back to prior years, as well as the proportionality of the excess tax benefits from equity vesting and exercises relative to profit before tax in each respective year. This was partially offset by a net reduction in tax expense mostly related to the write-off of uncertain tax position reserves in 2021. On a non-GAAP basis, the 2021 full year effective income tax rate was 20.0%.
Net income for 2021 was $653.0 million, or $22.90 per diluted share, compared to net income of $355.8 million, or $12.52 per diluted share for 2020. Excluding the impact of modification expenses related to our 2018 PSUs, legal expenses, corporate restructuring, restaurant asset impairment, and certain other costs, adjusted net income for 2021 was $724.8 million and adjusted diluted earnings per share was $25.42.
More information will be available in our Annual Report on Form 10-K, which we expect to file with the SEC by February 11, 2022.
Outlook
For 2022, management is anticipating the following:
- First quarter comparable restaurant sales growth in the mid to high single digits range
- Between 235 to 250 new restaurant openings (including 5 to 10 relocations to add a Chipotlane), which assumes construction and permit delays related to COVID-19 don’t worsen
- An estimated underlying effective full year tax rate between 25% and 27% before discrete items
📉 CMG Stock Technical Analysis
Both the long and short-term trends are negative. Volume is considerably higher in the last couple of days. CMG is part of the Hotels, Restaurants & Leisure industry. There are 140 other stocks in this industry, CMG did better than 42% of them. CMG is currently trading in the middle of its 52-week range. The S&P500 Index however is trading in the upper part of its 52-week range, so CMG is lagging the market slightly.
There is support at 1512.46 from a horizontal line in the daily time frame. There is also a support zone ranging from 1444.04 to 1483.45. This zone is formed by a combination of multiple trend lines and important moving averages in multiple time frames. There is support at 1403.79 from a trend line in the weekly time frame. There is also support at 1378.39 from a horizontal line in the weekly time frame. Finally, there is support at 1307.19 from a horizontal line in the daily time frame.
There is resistance at 1666.14 from a trend line in the daily time frame. There is also resistance at 1851.48 from a horizontal line in the daily time frame. Finally, there is strong resistance at 1899.98 from a horizontal line in the daily time frame.
The technical rating of CMG is bad and it also does not present a quality setup at the moment. CMG stock has a Setup Rating of 2 out of 10. Price movement has been a little bit too volatile to find a nice entry and exit point. It is probably a good idea to wait for a consolidation first. Click here to sign up for email alerts on when CMG stock consolidates and has a Setup Rating of 8 or higher.
