Evie Liu
Chipotle Mexican Grill is set to report earnings on Wednesday after the market closes. The fast-casual giant has shown remarkable strength in an inflationary economy, as consumers continue to go for its salad bowls and burritos despite multiple rounds of price raises.
The stock has gained 30% year to date, and nearly 60% since last October.
For the first three months of 2024, Wall Street analysts expect the company to report $11.69 in earnings per share and $2.68 billion in sales, according to FactSet. That's 11% and 13% growth from the year-ago period, respectively.
In 2023's fourth quarter, Chipotle posted earnings and sales that both beat Wall Street forecasts. Not only did the company achieve a 15.4% year-over-year revenue growth, its operating margin also expanded to 15.8% from 13.4%.
Same-store sales rose 8.4% from a year ago, driven by not only higher menu prices, but also better foot traffic. Much of the fast-food industry has been feeling pain as many consumers cut back on dining out.
Chipotle is benefiting from its unique customer base, who tend to be younger, more affluent, and more conscious about their health and diet. In the face of inflation, this group has been more resilient and has remained loyal to Chipotle.
Management said in the last earnings call that the company will likely inch prices higher by another 2.5% to 3% throughout the first quarter. For 2024, Chipotle expects same-store sales to grow by mid-single digits in percentage terms.
Chipotle also continues to grow at a fast pace. In 2024, the company plans to open between 285 to 315 new restaurants on top of the over 3,400 locations it already runs.
The burrito chain is entering many new markets across the country, from urban and suburban to rural areas. As the company expands, management said they continue to see strong demand across various income groups beyond its core customers of younger, higher-income professionals . In the fourth quarter, average unit sales volume surpassed $3 million.
In the long run, Chipotle hopes to double its store count to 7,000 across the nation and reach an average unit sales of $4 million across the massive network.
Following the recent rally, the stock is trading at a high valuation -- at prices 51 times forward earnings, it's much higher than the 40 times average over the past two decades, and higher than many fast-food peers including McDonald's and Domino's Pizza.
The stock has grown so much that Chipotle announced a 50-for-1 split last month, the first in the company's history. Shareholders still have to approve the move at the company's annual meeting, slated for June 6.
Write to Evie Liu at evie.liu@barrons.com
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April 24, 2024 10:15 ET (14:15 GMT)
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