Eric Bleeker: OK, let's move on. Chipotle: one of the most fantastic stories in retail across the past decade. It's a truly wonderful company. Let's talk about reasons to buy it. We'll contrast with the sell shortly after.
Let's look at, in spite of the high P/E, in spite of the short-seller attacks recently, what are some reasons to still believe in Chipotle?
Austin Smith: Some reasons to buy today is that those sort of short-seller attacks that have come out, most notably David Einhorn -- it's important to note that David Einhorn didn't dislike Chipotle as a business. He just disliked the multiple.
What happened when he came out is, this company came way down to earth and now they're trading right in line with their peers. I believe they're about 30 times earnings, which is comparable to companies like Panera, it's comparable to Starbucks, it's comparable to Buffalo Wild Wings, but unlike a company like, say, Starbucks, Chipotle is so far away from saturation.
The only market they've really hit saturation in is their domestic market of Denver. You've got about 1,300 locations. The sort of operating leverage that you get from continued store expansion -- and believe me, Chipotle is still growing at a very heady pace -- is admirable and it's not just existing Chipotle locations.
They can still go international. They've got their ShopHouse concept that they've rolled out both in D.C. – I believe they're targeting two locations – and also in San Francisco, I believe, and they've been very well received.
Even though this company has a lot of growth in their core concept, their Chipotle store, they've still got ShopHouse, they've still got international, and they are so far away from saturation domestically. Their same-store sales continue to climb higher.
They've hit that nice middle point between a McDonald's and a fast casual like a Darden that so many people have steered away from, coming out of the recession.
There's a great cultural shift toward the price point that Chipotle's offering. There's a great cultural shift toward a healthier eating background that Chipotle taps into so well with all their organic food, and they still have so much potential to expand domestically with so few locations.
Eric: Yeah, definitely riding the personal wellness -- I would call this a supertrend -- a very hidden supertrend.
You mentioned about Einhorn. In the wake of that presentation it fell below 240, and now back over 305, so you're seeing kind of a re-expansion of that multiple as people go, "Hey, they are pretty much firing on all cylinders."
Austin: Right, and they have a stellar balance sheet, to boot. There's not a whole lot of risk there. While the graveyard for long-term investors is littered with restaurant concepts, no doubt, Chipotle, at least today and historically, has demonstrated themselves to be very, very competent at their expansions, their same-store sales growth, and they've executed on every front.
I have no reason to believe that they're not going to be able to do this for at least the next five years.