Burrito maker Chipotle Mexican Grill (CMG +1.59%) is scheduled to report its fourth-quarter results after the market closes today. The update is important for investors, as it follows a beating in the stock price recently. Shares have slid 23% over the past six months and 17% in 2022 alone. Investors are probably hoping that the fast-casual king can reinvigorate investor excitement for the stock.
While shares of the growth stock are down recently, the underlying business has been firing on all cylinders. So investors are probably hoping for more of the same from the company when it releases its fourth-quarter numbers today.
Ahead of the earnings report, here's a review of some of the hot topics investors should check on.
Image source: Chipotle Mexican Grill.
1. Comparable restaurant sales
Arguably the most closely watched Chipotle metric every quarter is the company's reported comparable restaurant sales growth rate. The metric, which measures the year-over-year change in total revenue from restaurants that have been in operation for at least 13 calendar months, is investors' best window into the company's ability to grow sales from improving operations, menu innovation, and other efforts at existing restaurants. It's a reflection of foot traffic, transactions, and average transaction price.
In Q3, Chipotle's comparable restaurant sales increased 15.1%, contributing substantially to the company's 21.9% year-over-year revenue growth during the period. Management cited the ongoing recovery of in-restaurant sales, menus innovation, and strength in digital sales as key drivers for Chipotle's sales momentum.
The company expects robust sales growth to persist, as Chipotle said in its third-quarter update that it expected its fourth-quarter comparable restaurant sales "to be in the low to mid-double-digits range."
2. Digital sales
Impressively, Chipotle's digital sales have continued to grow even as more consumers return to in-restaurant orders. Digital sales increased 8.6% year over year in Q3 despite going up against an extraordinary year-ago comparison in which digital sales soared 202.5% year over year.
With digital sales now representing more than 40% of total revenue, the channel has become a major driver for the company. Investors should hope for a similar growth rate, if not better, from digital sales in Q4.
3. Restaurant-level operating margin
Highlighting how the company is scaling its business well, its restaurant-level operating margins have been improving meaningfully recently. In Q3, the metric came in at 23.5% -- up 400 basis points from where it was in the year-ago period.
"The improvement was driven primarily by leverage from comparable restaurant sales including menu price increases, partially offset by wage inflation and higher costs associated with beef and freight," said management in the company's third-quarter earnings release.
With Chipotle chief financial officer John Hartung saying in the company's third-quarter earnings call that beef and freight costs continued to worsen after the third quarter, it wouldn't be surprising to see this metric contract some sequentially in Q4.
Investors can find Chipotle's fourth-quarter results on its investor relations website, shortly after the market closes today.
