Great Stuff for Investors, but Even Better Stuff for The Fans.
Chipotle has been in the news a lot lately, but rather than the mainstream news or industry news, it’s been financial news. The popular Mexican food chain had a fantastic year in 2021, and continue to see great success as reflected in fourth quarter earnings statements.
So, where do I begin? Every part of what Chipotle recently released as it’s full year 2021/ 4th quarter earnings is enough to make any investor swoon.
Let’s start with volume, as in real estate volume. In the second year of the pandemic, amid supply chain shortages and continued uncertainty, Chipotle managed to open 215 new stores and another 78 in the fourth quarter , which brings the total number of restaurants to 2,966. That makes it easy to understand why their growth outlook was revised from a goal of 6,000 to 7,000 restaurants, and an expected growth between 8% and 10% per year.
“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.”
Yes, Mr. Niccol, you are correct, sir! Total fourth quarter revenue of your restaurant chain was up 22% to $2 billion! Digital sales in the same period were up 3.8% and accounted for 41.6% of sales. You had a company-wide operating margin of 8.1%, but a gonzo 20.2% restaurant operating margin! But it doesn’t stop there, no sir!
Let’s talk about 2021, Brian. May I call you Brian? Great! Brian, your company went bonkers last year! We’re talking revenue that jumped up 26.1% to $7.5 billion. Restaurant sales that rose by 19.3%, digital sales that rose 24.7%, and an operating margin that went from 4.8% to 10.7%. Good job! But the best part is this: the individual restaurants had an operating margin of 22.6%!! And that’s the operating margin, not the profit margin. You, dear reader, not you Brian, can find the difference in the terms here, but in a nutshell, an operating margin tells a fuller story.
Investors, consider ownership of this company. They have $1.4 billion in cash, no debt, and have a rabidly loyal customer base. A customer base that has continued to buy Chipotle food at ever higher prices without so much as a roll of the eyes. They will happily pay more. And that gives Chipotle what they call “pricing power”. They can raise prices without pissing off their customers. What other mix of attributes does one need for crazy success?
Those of you that love your Chipotle, keep on truckin’. That food you love is set to be even more available throughout more of the country very soon, and that little empire will be built on your backs. Brian, you have a lot to be thankful for, young man!