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CHIPOTLE MEXICAN GRILL INC

For the period ended Jun 30, 2024. Filed Jul 25, 2024.

View on SEC.gov

About this filing

A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Jun 30, 2024 · Filed Jul 25, 2024

CMG$34.43-2.7%Stored close · as of Nov 6, 2026

What changed in Management’s Discussion and Analysis?

Read the current filing

Previous report: 10-Q

Period ended 2024-03-31; filed 2024-04-25.

0001058090-24-000015

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Current report: 10-Q

Period ended 2024-06-30; filed 2024-07-25.

0001058090-24-000032

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.

Compared 58 previous paragraphs and 66 current paragraphs.

35 unchanged; 20 reworded; 10 added; 3 removed; 0 previous and 1 current paragraphs rearranged.

Tables are not compared: 12 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.

A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.

Added paragraphs (10)

Current report

Licensing. In April 2024, our first licensed location opened in Kuwait City in partnership with international licensed retail operator Alshaya Group. Our location in Kuwait marks the first time the we have entered a new country in over 10 years, and is our only licensed restaurant.

Current report

Food, beverage and packaging costs remained flat as a percentage of total revenue for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, including a 1.2% benefit from menu price increases in the prior year. This benefit was partially offset by inflation of avocados, increased oil usage for frying chips, and higher incidence of beef as a result of the continued success of our Braised Beef Barbacoa marketing initiative.

Current report

Labor costs decreased 0.3% as a percentage of total revenue for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, including 1.3% from sales leverage, partially offset by 0.8% due to restaurant wage inflation, of which 0.3% was due to the minimum wage for restaurants like Chipotle in California increasing to $20 per hour in April 2024.

Current report

Other operating costs decreased 1.0% as a percentage of total revenue for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, respectively, primarily due to 0.8% of sales leverage, a 0.1% decrease in restaurant technology costs, and 0.1% of lower delivery expenses, partially offset by 0.1% of increased utilities expense.

Current report

Impairment, closure costs, and asset disposals decreased in dollar terms for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to elevated impairment of operating lease assets and leasehold improvements in the comparable period, which included the impact of our decision to close Pizzeria Locale.

Current report

Impairment, closure costs, and asset disposals decreased in dollar terms for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily due to elevated impairment of operating lease assets and leasehold improvements and higher charges related to the replacement of certain leasehold improvements and kitchen equipment in the comparable period.

Current report

The effective income tax rate for the six months ended June 30, 2024 was 23.7%, an increase from an effective income tax rate of 23.2% for the six months ended June 30, 2023, primarily due to a decrease in tax benefits from option exercises and equity vesting, partially offset with a decrease in tax reserves.
Removed paragraphs (3)

Previous report

In April 2024, the minimum wage for restaurants like Chipotle in California increased to $20 per hour, resulting in a nearly 20% increase of our labor costs in California. Subsequently, we increased menu prices by 6 to 7% in our California restaurants to mitigate our increased costs in dollar terms.
Reworded paragraphs (20)

Previous wording

Certain statements in this report are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the number of new restaurants we expect to open and the number with Chipotlanes, our expectation to generate positive cash flow for the foreseeable future, our ability to manage risks in our supply chain, our plans for continuing stock buybacks and the period of time during which our cash and short-term investment will fund our operations. We use words such as “anticipate”, “believe”, “could”, “should”, “may”, “approximately”, “estimate”, “expect”, “intend”, “project”, “target”, and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this report are based on currently available operating, financial and competitive information available to us as of the date of this filing and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements, including but not limited to: increasing wage inflation, including as a result of regulations such as California AB 1228, and the competitive labor market, which impacts our ability to attract and retain qualified employees and has resulted in occasional staffing shortages; the impact of any union organizing efforts and our responses to such efforts; increasing supply costs; risks of food safety incidents and food-borne illnesses; risks associated with our reliance on certain information technology systems and potential material failures or interruptions; privacy and cyber security risks, including risk of breaches, unauthorized access, theft, modification or destruction of guest or employee personal or confidential information stored on our network or the network of third party providers; the impact of competition, including from sources outside the restaurant industry; the financial impact of increasing our average hourly wages; the impact of federal, state or local government regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the costs and availability of suitable new restaurant sites, construction materials and contractors; the expected costs and risks related to our international expansion through franchise restaurants in the Middle East; increases in ingredient and other operating costs due to inflation, global conflicts, climate change, our Food with Integrity philosophy, tariffs or trade restrictions; intermittent supply shortages relating to our Food with Integrity philosophy, rapid expansion and supply industry challenges; the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in consumers' perceptions of our…

Excerpt shortened here; the source contains the full paragraph.

Current wording

Certain statements in this report are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the number of new restaurants we expect to open and the number with Chipotlanes, our expectation to generate positive cash flow for the foreseeable future, our expectations for utilization of cash flow from operations, our ability to manage risks and volatility in our supply chain, our plans for continuing stock buybacks and the period of time during which our cash and short-term investment will fund our operations. We use words such as “anticipate”, “believe”, “could”, “should”, “may”, “approximately”, “estimate”, “expect”, “intend”, “project”, “target”, "goal" and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this report are based on currently available operating, financial and competitive information available to us as of the date of this filing and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements, including but not limited to: increasing wage inflation, including as a result of state or local regulations mandating higher minimum wages, and the competitive labor market, which impacts our ability to attract and retain qualified employees and has resulted in occasional staffing shortages; the impact of any union organizing efforts and our responses to such efforts; increasing supply costs; risks of food safety incidents and food-borne illnesses; risks associated with our reliance on certain information technology systems and potential material failures, interruptions or outages; privacy and cyber security risks, including risk of breaches, unauthorized access, theft, modification, destruction or ransom of guest or employee personal or confidential information stored on our network or the network of third party providers; the impact of competition, including from sources outside the restaurant industry; the impact of federal, state or local government regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the costs and availability of suitable new restaurant sites, construction materials and contractors; the expected costs and risks related to our international expansion, including through licensed restaurants in the Middle East; increases in ingredient and other operating costs due to inflation, global conflicts, severe weather and climate change, our Food with Integrity philosophy, tariffs or trade restrictions; intermittent supply shortages relating to our Food with Integrity philosophy, rapid expansion and supply chain disruptions; the uncertainty of our ability to achieve expected levels of comp…

Excerpt shortened here; the source contains the full paragraph.

Previous wording

As of March 31, 2024, we operated 3,411 Chipotle restaurants throughout the United States and 68 international Chipotle restaurants. We manage our U.S. operations based on nine regions and aggregate our operations to one reportable segment.

Current wording

As of June 30, 2024, we operated 3,460 Chipotle restaurants throughout the United States and 70 international Chipotle restaurants. Additionally, we had one international licensed restaurant. We manage our U.S. operations based on nine regions and aggregate our operations to one reportable segment.

Previous wording

•Diluted earnings per share was $13.01, a 23.9% increase from $10.50, which includes a $0.36 after-tax impact from an increase in legal reserves.

Current wording

•Diluted earnings per share was $0.33, a 32.0% increase from $0.25, which includes a $0.01 after-tax impact from an unrealized loss on a long-term investment and an increase in legal reserves.

Previous wording

Sales Trends. Comparable restaurant sales increased 7.0% for the three months ended March 31, 2024. The increase is primarily attributable to higher transactions and, to a lesser extent, an increase in average check. Comparable restaurant sales represent the change in period-over-period total revenue for restaurants in operation for at least 13 full calendar months. Digital sales represented 36.5% of total food and beverage revenue.

Current wording

Sales Trends. Comparable restaurant sales increased 11.1% for the three months ended June 30, 2024. The increase is primarily attributable to higher transactions and, to a lesser extent, an increase in average check. Comparable restaurant sales represent the change in period-over-period total revenue for restaurants in operation for at least 13 full calendar months. Digital sales represented 35.3% of total food and beverage revenue.

Previous wording

Restaurant Operating Costs. During the three months ended March 31, 2024, our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) were 72.5% of total revenue, a decrease from 74.4% during the three months ended March 31, 2023. The decrease was driven by the benefit of sales leverage, partially offset by wage inflation and, to a lesser extent, inflation across several food costs.

Current wording

Restaurant Operating Costs. During the three months ended June 30, 2024, our restaurant operating costs (food, beverage and packaging; labor; occupancy; and other operating costs) were 71.1% of total revenue, a decrease from 72.5% during the three months ended June 30, 2023. The decrease was driven by the benefit of sales leverage, partially offset by wage inflation and, to a lesser extent, inflation across several food costs.

Previous wording

Restaurant Development. During the three months ended March 31, 2024, we opened 47 new restaurants, which included 43 restaurants with a Chipotlane. We are on track to open approximately 285-315 new restaurants in 2024. We expect that at least 80% of our new restaurants will include a Chipotlane.

Current wording

Restaurant Development. During the three months ended June 30, 2024, we opened 52 company-operated restaurants, which included 46 restaurants with a Chipotlane. We are on track to open approximately 285-315 new restaurants in 2024. We expect that at least 80% of our new restaurants will include a Chipotlane.

Previous wording

The following table details restaurant unit data for the periods indicated.

Current wording

The following table details licensed restaurant unit data for the periods indicated.

Previous wording

Food, beverage and packaging costs decreased 0.4% as a percentage of total revenue for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, including a 0.9% benefit from menu price increases in the prior year. This benefit was partially offset by inflation across several ingredient costs, primarily beef and produce, and higher incidence of beef from a Braised Beef Barbacoa marketing initiative.

Current wording

Food, beverage and packaging costs decreased 0.2% as a percentage of total revenue for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, including a 1.0% benefit from menu price increases in the prior year. This benefit was partially offset by inflation of avocados, higher incidence of beef from a Braised Beef Barbacoa marketing initiative and increased oil usage for frying chips.

Previous wording

Labor costs decreased 0.2% as a percentage of total revenue for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, including 1.1% from sales leverage, partially offset by 0.6% due to restaurant wage inflation and, to a lesser extent, increased performance-based compensation.

Current wording

Labor costs decreased 0.2% as a percentage of total revenue for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, including 1.5% from sales leverage, partially offset by 1.1% due to restaurant wage inflation, of which 0.5% was due to the minimum wage for restaurants like Chipotle in California increasing to $20 per hour in April 2024.

Previous wording

Occupancy costs decreased 0.1% as a percentage of total revenue for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, respectively, primarily due to sales leverage, partially offset by increased occupancy expense associated with existing restaurants.

Current wording

Occupancy costs decreased 0.2% as a percentage of total revenue for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively, primarily due to sales leverage, partially offset by increased occupancy expense associated with existing restaurants.

Previous wording

Other operating costs decreased 1.0% as a percentage of total revenue for thethree months ended March 31, 2024 compared to the three months ended March 31, 2023, including 0.6% of sales leverage, 0.2% of lower delivery expenses and 0.2% of lower advertisement and marketing promotions expense.

Current wording

Other operating costs decreased 1.0% as a percentage of total revenue for thesix months ended June 30, 2024 compared to the six months ended June 30, 2023, respectively, primarily due to 0.7% of sales leverage, 0.2% of lower delivery expenses, and 0.1% of lower advertisement and marketing promotions expense.

Previous wording

Following is a summary of the change in general and administrative expense for the period indicated:

Current wording

The following is a summary of the change in general and administrative expense for the period indicated:

Previous wording

Depreciation and amortization decreased 0.1% as a percentage of total revenue for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to sales leverage, partially offset by increased depreciation expense associated with new restaurants.

Current wording

Depreciation and amortization decreased 0.3% as a percentage of total revenue for the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, primarily due to sales leverage, partially offset by increased depreciation expense associated with new restaurants.

Previous wording

Interest and other income, netincreased in dollar terms for thethree months ended March 31, 2024 compared to thethree months ended March 31, 2023, primarily due to increased interest income on our investments in U.S. Treasury securities, money market funds and time deposits due to a higher average investment balance and higher interest rates.

Current wording

Interest and other income, netincreased in dollar terms for thethree and six months ended June 30, 2024 compared to thethree and six months ended June 30, 2023, primarily due to increased interest income on our investments in U.S. Treasury securities, money market funds and time deposits due to a higher average investment balance and higher interest rates, which was partially offset by an unrealized loss on a long-term investment.

Previous wording

The effective income tax rate decreased 0.5% for the three months ended March 31, 2024 compared to the three months ended March 31, 2023, primarily due to an increase in tax benefits from option exercises and equity vesting.

Current wording

The effective income tax rate for the three months ended June 30, 2024 was 25.0%, an increase from an effective income tax rate of 23.8% for the three months ended June 30, 2023, primarily due to a decrease in tax benefits from option exercises and equity vesting, partially offset with a decrease in tax reserves.

Previous wording

As of March 31, 2024, we had a cash and marketable investments balance of$2.1 billion, non-marketable investments of$76.0 million and$26.1 million of restricted cash. After funding the current operations in our restaurants and support centers, the first planned use of our cash flow from operations is to provide capital for the continued investment in new restaurant construction. In addition to continuing to invest in our restaurant expansion, we expect to utilize cash flow from operations to: repurchase additional shares of our common stock subject to market conditions; invest in, maintain, and refurbish our existing restaurants; and for general corporate purposes. As of March 31, 2024,$399.1 million remained available for repurchases of shares of our common stock. Under the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions.

Current wording

As of June 30, 2024, we had a cash and marketable investments balance of$2.4 billion, non-marketable investments of$68.6 million and$27.7 million of restricted cash. After funding the current operations in our restaurants and support centers, the first planned use of our cash flow from operations is to provide capital for the continued investment in new restaurant construction. In addition to continuing to invest in our restaurant expansion, we expect to utilize cash flow from operations to: repurchase additional shares of our common stock subject to market conditions; invest in, maintain, and refurbish our existing restaurants; and for general corporate purposes. As of June 30, 2024,$647.7 million remained available for repurchases of shares of our common stock. Under the remaining repurchase authorizations, shares may be purchased from time to time in open market transactions, subject to market conditions.

Previous wording

Cash provided by operating activities was $569.2 million for the three months ended March 31, 2024, compared to $455.0 million for the three months ended March 31, 2023. The increase was primarily due to higher net earnings and, to a lesser extent, net cash changes in operating assets and liabilities.

Current wording

Cash provided by operating activities was $1.1 billion for the six months ended June 30, 2024, compared to $1.0 billion for the six months ended June 30, 2023. The increase was primarily due to higher net earnings and, to a lesser extent, net cash changes in non-tax operating assets and liabilities. This increase was partially offset by timing of tax-related payments.

Previous wording

Cash used in investing activities was $301.0 million for the three months ended March 31, 2024, compared to $235.5 million for the three months ended March 31, 2023. The change was primarily associated with a $53.2 million increase in investment purchases net of investment maturities.

Current wording

Cash used in investing activities was $637.3 million for the six months ended June 30, 2024, compared to $627.7 million for the six months ended June 30, 2023. The change was primarily associated with increased capital expenditures of $15.6 million primarily related to new restaurant development. This increase was partially offset by a $6.0 million decrease in investment purchases net of investment maturities.

Previous wording

Cash used in financing activities was $100.1 million for the three months ended March 31, 2024, compared to $193.9 million for the three months ended March 31, 2023. The change was primarily due to decreased treasury stock repurchases of $99.7 million.

Current wording

Cash used in financing activities was $245.4 million for the six months ended June 30, 2024, compared to $289.1 million for the six months ended June 30, 2023. The change was primarily due to decreased treasury stock repurchases of $49.4 million.
Rearranged current paragraphs (1)

Current report — wording carried from elsewhere

The following table details company-operated restaurant unit data for the periods indicated.