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- same store sales down 29.7% vs 28.4% estimate.
- loss of 88 cents per share (loss of $26.4 million) vs loss of 95 cents per share estimate. Had profit of $3.88 per share ($122.6 million) a year ago.
- revenue down 23% to $834.5 million vs $868 million estimate. Revenue was $1.1 billion a year ago.
- margins of 6.8% vs 27.5% a year ago
The fast-casual chain could see negative comps through early 2017 and is facing higher labor costs.
By Maxim Group
($433.39, June 8, 2016)
We are lowering our price target on Chipotle Mexican Grill to $285 from $300, as we believe that Wall Street still needs to adjust longer-term earnings growth expectations.
We believe that:
1) Chipotle’s (ticker: CMG ) comps are likely to remain negative through early 2017;
2) management will need to make additional investments to boost traffic and ensure food safety;
3) new unit growth is not likely to accelerate as rapidly as management forecasts;
4) higher labor costs in California, New York and now Washington D.C. likely will mute margin expansion; and
5) legal risk from the federal grand jury investigation may produce prolonged downside.
Hence, we are maintaining a forward price/earnings (P/E) multiple that is below the 31 times the average of the past three years. Multiplying our 25 times forward P/E target (which is near the 2008 recession-low of 24 times) by our downwardly revised 2017 earnings-per-share estimate of $11.41, we arrive at our new $285 price target. Our revised $285 price target also corresponds to a forward enterprise value/earnings before interest, taxes, depreciation and amortization (EV/Ebitda) ratio of 11.8 times using a 2017 base-valuation year, which is below the three-year average of 18.7 times.
We rate Chipotle at Sell.
We expect May same-restaurant sales results to be released in the next week or so, and believe these results will disappoint. Based on our channel checks, the slow recovery in traffic -- which was boosted earlier in the second quarter by a free-burrito promotion -- seems to have lost momentum in the past few weeks. More recently, Chipotle has targeted “buy one, get one free” promotions to teachers and nurses, but we do not believe this has led to a broad-based, sustainable turnaround in traffic.
As we contend that sales trends remain disappointing into June, we now believe that management will consider broader promotional activity -- possibly including another free burrito promotion — in the second half. In our view, Chipotle’s outsized exposure to California, New York State, and now Washington D.C., will limit margin expansion in 2017 and beyond.
The District of Columbia Council voted unanimously to raise the minimum wage to $15 an hour by 2020. Chipotle has 22 units in Washington D.C. that will be subject to the new mandate. When combined with earlier legislation mandating $15 an hour (in the next four to five years) passed in California and New York State, Chipotle will be subject to accelerated wage increases in 25% of the company’s U.S. restaurants.
We estimate that Chipotle will need to implement menu price increases of as much as 150 basis points per year just to cover mandated wage increases, assuming average mandated increases of $1.00 an hour in California, New York and Washington D.C., and about 25 cents an hour elsewhere in the U.S. As we contend that Chipotle is finding it more difficult to generate nonpromotional traffic in the wake of recent food-safety scares, we are concerned that the company may not be able to pass along these price increases.
We are maintaining our view that management will decide not to accelerate unit growth in 2016 and perhaps 2017. Although management still expects 220-235 new units in 2016, we believe that unit development in 2016 and 2017 will be below this range as we argue that execution risk remains a concern for Chipotle. We believe that the expanded federal criminal probe highlights Chipotle’s potential legal risk. Although we believe that management’s more recent and aggressive food-safety stance may mitigate any unfavorable verdict, we still caution that an unfavorable verdict regarding the company’s practices may lead to another bout of negative headline risk -- and thus downside for Chipotle shares.
This restaurant just unseated Chipotle as the most popular Mexican chain
June 9, 2016
People with a hankering for a burrito are no longer beelining for Chipotle first. Or second, or third, or fourth.
Moe's Southwest Grill, a Tex-Mex chain with less than half the number of locations as Chipotle, has unseated the former fast casual king as the most popular brand selling Mexican-inspired food, according to an annual survey out Thursday from Harris Poll that measures how people feel about restaurant brands. Moe's has more than 650 restaurants to Chipotle's more than 1,900.
Moe's, which is owned by the same company that operates shopping mall mainstays Auntie Anne's and Cinnabon, claimed the "Brand of the Year" title for fast casual Mexican restaurants for the first time, while Chipotle fell hard. The No. 1 pick for the past three years, it's now ranked below not only Moe's but Taco Bell, Qdoba and Baja Fresh.
The survey is yet another sign of the harsh impact Chipotle's food-safety issues have had on the brand in the past year. Chipotle has been grasping at a former semblance of its reputation as a purveyor of fresh food in the months since dealing with multiple incidences of E. Coli and norovirus at restaurants across the country. Sales tanked, a rude awakening for a brand that had been wildly popularity for years.
The company has said customers are coming back around though, and has tried to lure customers back with offers for free burritos and buy one, get one deals. In the first quarter, sales at stores open at least a year fell nearly 30%, though the company said transaction volume improved as the quarter went on. A free burrito offer in February had a 67% redemption rate.
"Their sales have been under tremendous pressure," says Andrew Charles, an equity research analyst with Cowen and Co. who follows both Chipotle and Qdoba. "Brand perception is down. In retrospect, I just don't think they did enough to convince customers that Chipotle food was safe to eat," pointing out that there are no signs in stores alerting customers to the changes and announcements on social media have been scarce.
Moe's rose to the top for ranking the highest in familiarity, quality and purchase consideration. Harris Poll surveyed more than 97,000 U.S. consumers for their thoughts on more than 3,800 brands, including more than 60 restaurants. Each respondent was given a list of 40 randomly selected brands to rate.
Chipotle shares at pricey multiples as Wall Street eyes May sales
June 9, 2016 3:11 PM
Shares of Chipotle Mexican Grill appear expensive as Wall Street awaits fresh data on the burrito chain's struggle to recover from a string of food-borne illness outbreaks.
Sales data for May, which analysts believe the company might release in the next several days, could provide evidence of whether two-for-one deals are successfully luring customers back after Chipotle posted its first-ever loss in the first quarter.
Its same-restaurant sales may have fallen 20 percent year-on-year in May, according to the consensus of analyst estimates tracked by Thomson Reuters. Chipotle does not normally provide mid-quarter updates, but it has done so occasionally in recent months in order to increase transparency around the crisis.
Shares of Chipotle have dropped 40 percent since August after norovirus and E.coli outbreaks at some of its outlets led to a plunge in sales for the company, which markets its burritos and tacos as healthier than rivals' food.
Estimates for Chipotle's earnings per share for this year have fallen much further than its stock price. Wall Street has slashed its average earnings estimate for 2016 to $4.81 per share from over $20 before the food safety crisis, according to Thomson Reuters data.
Chipotle's stock is now trading near 55 times the next 12 months' expected earnings, its priciest multiple since just after the Wall Street favorite listed its stock a decade ago.
But with investors viewing 2016 as a near write-off for Chipotle because of the food contamination crisis, many are focusing on earnings expectations for next year, when profits are seen rebounding to $11.86 per share.
Based on that figure, Chipotle's stock is trading at a less stratospheric PE of 35, suggesting Wall Street is optimistic about the speed of the company's recovery.
Chipotle stock target cut to $340 at Deutsche Bank
June 13, 2016
Shares of Chipotle Mexican Grill Inc. ticked lower in premarket trade Monday after Deutsche Bank cut the stock's 12-month price target to $340 from $360 and reiterated a sell rating.
Analyst Brett Levy said the reduced target reflects a loss in customers - some of which "may be lost for good" - and other issues that may continue to weigh on average unit volume. AUV has experienced a "dramatic sales decline" over the last year amid the E. Coli outbreak.
The average rating on the stock is the equivalent to hold, while the median price target among a poll of nearly 20 analysts is $459.76, according to FactSet.
I find it verry difficult to take seriously any survey that places Taco Bell as #2 at anything. Except perhaps for inducing #2...
I'm not too worried. CMG should bounce back. Although it's been a while since I've eaten there so that might be a player in their less than stellar sales. I think I used to subsidize a good portion of the local store.
Chipotle plummets in latest consumer satisfaction survey
Jun 21, 2016
After enduring a 2015 replete with reports of food-borne illnesses at its restaurants, Chipotle Mexican Grill Inc. plummeted in a new consumer satisfaction report.
In the latest report released Monday by the American Customer Satisfaction Index (ACSI), Denver-based Chipotle (NYSE: CMG) fell 6 percent in customer satisfaction, the biggest drop in the "limited services restaurant" category.
"Quality issues can be challenging, particularly for food service companies, which could elongate Chipotle’s recovery time," according to the ACSI report.
“Higher quality drives the improving scores for the industry, but quality issues relating to food-borne illnesses knock down Chipotle,” says ACSI Managing Director David VanAmburg, in a statement.
Chick-fil-A led the category, followed by Papa John's.
Chipotle Mexican Grill takes the biggest ACSI hit, falling 6% to 78 in the wake of food-borne illness outbreaks at some of its stores. As of the first quarter of 2016, sales were down more than 20% year-over-year. As of June, Chipotle’s stock price was down over 45% compared to levels seen prior to the outbreak. Quality issues can be challenging, particularly for food service companies, which could elongate Chipotle’s recovery time.
SunTrust Still Expecting A Strong Comps Recovery At Chipotle
June 22, 2016
Chipotle Mexican Grill, Inc. shares have underperformed their restaurant peers over the past month, declining 12.9 percent.
Jake Bartlett of SunTrust Robinson Humphrey maintains a Buy rating on the company, with a price target of $550.
SSS Recovery Likely
Bartlett expressed a continued bullish stance on Chipotle, with expectations of robust same-store sales recovery going forward.
“The trajectory of NT SSS is disappointing, but we see multiple NT and LT drivers to a SSS recovery,” the analyst mentioned.
The 2Q same-store sales estimate has been lowered from a decline of 18 percent to a decline of 20 percent.
However, the analyst also pointed out that the near-term and medium-term drivers included loyalty, chorizo, digital ordering, delivery and catering, while favorable real estate and price-value propositions could be long-term drivers of same-store sales recovery.
The EPS estimates for 2016 and 2017 have been lowered.
Latest Ratings for CMG
Too bad Jake Bartlett doesn't have a very good performance track record.
What Chipotle Is Doing to Win You Back This Summer
The Mexican burrito chain on Monday unveiled a promotion that will kick off July 1 and continue through the end of September, an event it is calling “Chiptopia Summer Rewards.” Chipotle said that unlike competitive offerings, the program rewards those that make multiple visits to the company’s restaurants. Most rewards programs are based on the total amount a customer spends.
Under the program this summer, Chipotle has three status levels: Mild, Medium and Hot. For example, to trigger the first “Mild” reward, a shopper would need to visit Chipotle four times in a month and make a qualifying purchase of $6 or more during each visit. They would then be rewarded with a free entree.
The idea of this promotion is to boost traffic. That metric was problematic in the first quarter of 2016, when revenue tumbled 23% to $834.5 million due to a 21% drop in transactions. A prolonged E. coli outbreak, which spread across a handful of states and generated major national headlines, is why Chipotle finds itself in a bit of a defensive position these days. The company already got promotional earlier this year, with the latest move indicating more needs to be done to get shoppers back into the restaurants.
Will all that work? Chipotle reports second-quarter results on July 21, which is when investors will get a clear sense of how promotions are potentially helping boost demand. Wall Street analysts are predicting a steep drop in net income and a roughly 12% decline in sales from year-earlier levels, though those trends would be an improvement from what was reported in the first quarter.
Chipotle Is Still A Sell On New Burrito Giveaways: Maxim
June 27, 2016
Chipotle Mexican Grill (CMG) announced its new ‘Chiptopia’ promotion that rewards diners with free food. By all means take the burrito, but leave the stock, says Maxim.
Analyst Stephen Anderson reiterated his Sell rating and $285 price target on Chipotle Monday, writing that while the giveaways aren’t as extreme as those earlier this year, they represent the new normal for the company as it works to rebuild traffic at its stores and regain consumer trust.
He also warns that the company faces permanently higher costs from increased food safety compliance, is exposed to potential mandates for higher minimum wages, and could still face legal risk stemming from the ongoing Federal criminal probe, all of which obscures earnings visibility.
From the note:
We acknowledge that the rewards offered by the Chiptopia Summer Rewards program are not as extreme as the free and buy-one-get-one burrito giveaways instituted earlier in 2016, and may succeed in getting the “Chipotle loyalist” to make incremental purchases. Nevertheless, we believe that this promotion does not offer much for the larger population of less frequent Chipotle customers (according to a July 2015 study by market research firm Technomic, only 43% of CMG’s customers visit more than once a month), and that the company may need to take additional promotional measures in the coming quarters to bring these customers back. For this reason, we believe that the 3Q16E (September) comp will be no better than negative mid-to-high teens.
He also writes that the Street hasn’t yet come to terms with the fact that comparable sales will probably be negative through early 2017 and new unit growth will take a hit. Moreover, even though lower commodity costs have been one positive for Chipotle in recent months, if that trend were to reverse Chipotle would be hit harder than peers.
Chipotle Mexican Grill Inc.'s top marketing executive on Tuesday was charged with drug possession and released after posting $4,500 in cash bail.Mark Crumpacker, the restaurant chain's chief creative and development officer, was one of 18 alleged buyers indicted as part of a $75,000 drug ring last week. He was led into the Manhattan Supreme Court courtroom with his hands cuffed behind his back by two New York City police officers.Prosecutors said authorities caught Mr. Crumpacker on a wiretap 13 times having drugs delivered to his Union Square apartment, most recently on June 18. He bought roughly $3,000 in cocaine during those transactions, prosecutors said."We don't have any statement to make," his attorney Gerald Lefcourt said after the brief hearing. "We're going to deal with the case in the courtroom." Mr. Crumpacker, who is due back in court in early September, left the courthouse without commenting.
The indictment, made public on Thursday, has nothing to do with Chipotle itself.Chipotle spokesman Chris Arnold said last week that the company had placed Mr. Crumpacker on administrative leave. "We made this decision in order to remain focused on the operation of our business, and to allow Mark to focus on these personal matters. Mark's responsibilities have been assigned to other senior managers in his absence," he said.
Chipotle's stock is down after claims of food poisoning incidents in Manhattan
Chipotle's stock is falling, after two tweets about another potential E. coli incident at the chain.
The burrito chain's stock fell as much as 3.5% on Thursday morning, after a Twitter user reported that someone had gotten sick after eating at a Manhattan location of the chain.
"My editor ended up in urgent care after being deathly ill all night from eating at Chipotle's," reads the tweet, from Eric Van Lustbader.
Van Lustbader further said that his editor spent seven hours in the emergency room, with doctors surmising that the illness could be traced to unsanitary food handling.
Some Twitter users, noting the drop in Chipotle stock, accused Van Lustbader of attempting to disparage Chipotle and purposefully influence the market. He defended himself, saying he was simply discussing his friend's health, calling the fall in Chipotle's stock an unintended consequence he had not even considered.
While it appears that a single tweet was responsible for the stock's original drop, another Twitter user replied to the tweet to report a similar incident.
The illness is at this time unconfirmed.
"I have not heard any reports of illness associated with any of our restaurants but will look into this," Chipotle spokesperson Chris Arnold told Business Insider.
The reaction shows just how susceptible Chipotle currently is to concerns about food safety. Chipotle's same-store sales dropped nearly 30% in the first quarter of the year, after an E. coli outbreak in late 2015 sickened more than 50 people in 14 states. Revenue dropped 23.4%, to $834.5 million.
Chipotle customers aren't coming back anytime soon, according to brutal analyst report
Chipotle shares fell nearly 2 percent in premarket trading Friday after Morgan Stanley said the company is struggling to woo back customers six months after a string of foodborne illnesses were linked to the Mexican food restaurants.
Morgan Stanley analyst John Glass downgraded shares of Chipotle to equal weight from overweight, and slashed the company's price target to $405 from $416.63, citing the protracted recovery.
Morgan Stanley surveyed 2,000 customers, of whom 720 ate at Chipotle, in mid- to late-June. The results of the survey suggest 13 percent of those polled say they still won't go back to the chain. That's only a modest decline from January, when an earlier poll was taken by the firm.
What's more, even among the customers who have ventured back to Chipotle, 13 percent say they opt for the restaurant less often. That means 25 percent of those surveyed say they have either stopped going to Chipotle or have reduced their frequency, Morgan Stanley said.
"The sales recovery will remain more protracted than the market believes, and possibly more costly as a result, as CMG likely needs to ramp up marketing spend to lure consumers back in," Glass said in a research note.
Glass said it could take "years" for Chipotle to return to its prior peak volumes.
"And while comps should begin to improve in the [second half of 2016], our work has compelled us to rethink the rate of improvement and commensurate margin gains in both '16 and '17, as well as longer term," Glass said in the note.
He said that if the chain continues to struggle, and it is met with other adverse conditions such as an increase in commodity costs that can't be passed along to consumers, the "bear" case for Chipotle shares is a price target of $250.
Interestingly, it's held the $390-$395 support area pretty well for the past month. Every time a negative news piece come out, it hits the low $390's, then bounces back a bit.
FactSet has EPS estimate at $0.91. Thomson Reuters has EPS estimate at $0.93. Estimize (where you got # from?) has it at $1.05. I guess no one really knows how sales are doing.
Options pricing an 8% move. Down to $385, or up to $450?
Customers are still concerned about food safety, according to one survey
Chipotle shares have an average hold rating among 37 analysts polled by FactSet. The average price target is $452.46.
Here’s what to expect:
Earnings:
Analysts polled by FactSet expect earnings of 91 cents per share, down from $4.45 for the same period last year.
Estimize, a software platform that gathers estimates from buy-side analysts, hedge-fund managers, academics, and others, is expecting EPS of $1.05 per share.
Revenue:
Analysts surveyed by FactSet are expecting sales of $1.05 billion for the quarter, down from $1.20 billion last year. Estimize analysts are expecting sales of $1.04 billion.
Thomson Reuters consensus estimates call for $0.93 in earnings per share (EPS) on $1.05 billion in revenue. In the same period of last year, EPS came in at $4.45, on revenue of $1.2 billion.
The company posted earnings of 87 cents per share on $988 million in revenue.
Analysts expect the burrito chain to post earnings of 93 cents a share on $1.05 billion in revenue, according to a consensus estimate from Thomson Reuters.
The company posted earnings of 87 cents per share on $988 million in revenue.
Analysts expect the burrito chain to post earnings of 93 cents a share on $1.05 billion in revenue, according to a consensus estimate from Thomson Reuters.
Chipotle Mexican Grill, Inc. Announces Second Quarter 2016 Results
DENVER--(BUSINESS WIRE)--Jul. 21, 2016-- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its second quarter ended June 30, 2016.
Overview for the three months ended June 30, 2016 as compared to the three months ended June 30, 2015:
Restaurant level operating margin was 11.6%, a decrease from 27.7%
Net loss was $0.8 million, a decrease from net income of $262.8 million
Diluted loss per share was $0.03, a decrease from diluted earnings per share of $8.34
Opened 114 new restaurants, net of two relocations
“We returned to profitability, and saw a modest improvement in comp sales trends in the second quarter. Our most recent marketing efforts, led by our Chiptopia frequency program, are off to a nice start in the third quarter, as customers are embracing the program and nearly 30% of all transactions are engaged in Chiptopia. Our entire company is focused on restoring customer trust and re-establishing customer frequency, and rewarding our most loyal customers for visiting more often through Chiptopia is one way to do just that. While it has only been a few weeks since Chiptopia launched, we are pleased to see that July sales comp trends have already improved by 200 to 300 basis points, and transaction comp trends have improved by an even greater amount,” said Steve Ells, founder, chairman and co-CEO of Chipotle.
Probably because they said things are improving in press release.
“We returned to profitability, and saw a modest improvement in comp sales trends in the second quarter. Our most recent marketing efforts, led by our Chiptopia frequency program, are off to a nice start in the third quarter, as customers are embracing the program and nearly 30% of all transactions are engaged in Chiptopia. Our entire company is focused on restoring customer trust and re-establishing customer frequency, and rewarding our most loyal customers for visiting more often through Chiptopia is one way to do just that. While it has only been a few weeks since Chiptopia launched, we are pleased to see that July sales comp trends have already improved by 200 to 300 basis points, and transaction comp trends have improved by an even greater amount,” said Steve Ells, founder, chairman and co-CEO of Chipotle.
Since CMG doesn't give guidance, that's all we have to go on. But will sales continue to hold up when Chiptopia program ends in September?
EDIT...
That's more like it.
After hours: $410.70 , -$7.37 (-1.76%) as of 4:37 PM EDT
03-30-2016, 03:30 PM
$7.25 (-1.83%)
