‘we’re fortunate with pricing power we have’

Shares of Chipotle Mexican Grill Inc (NYSE: CMG) jumped nearly 10% in extended trading after the restaurant chain reported a record quarter and said it now wants to expand its footprint in North America to 7,000 restaurants – 1,000 more than what it was targeting up until now.

Key takeaways in the Q4 report

Chipotle earned $5.58 (adjusted) on a per-share basis in Q4 versus the year-ago figure of $3.48. This compares to the FactSet consensus of $5.25 a share. At $1.96 billion, its sales were up 22% YoY; in line with experts’ forecast.

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Digital sales made up 41.6% of the quarterly total in the fiscal fourth quarter and were up 3.8% from last year. The California-based company forecasts a slowdown due to Omicron in the current quarter. It expects comparable sales to grow by 5.0% to 9.0% in Q1 versus the Street estimate for 8.9%.

Same-restaurant sales were up 15.2% in Q4 and operating margin jumped from 7.3% to 8.1%, as per the earnings press release. Chipotle opened 78 new restaurants in the recent quarter and expects another 235 to 250 this year “based on success of small-town locations”.

Highlights from CEO’s interview on CNBC

CEO Brian Niccol attributed the strong quarterly results to pricing power that enabled Chipotle to lift menu prices without hurting demand. On CNBC’s “Closing Bell”, he said:

We’re pretty fortunate with the pricing power that we have. Our brand is really strong. We are currently at about a 6.0% price increase and we know if we need to take more pricing, we have room to do it. To date, we have seen no resistance from our customers.

Niccol does expect more price hikes in 2022 as beef and freight costs continue to keep up. He, however, expressed confidence that Chipotle was in good shape on the labour front with staffing already back to pre-COVID levels.  

Last week, BTIG slashed its price target on Chipotle to $1,975 from $2,150.