Chipotle Mexican Grill (CMG 6.33%) had a good year in 2021, and it expects 2022 to be even better. There are two stories here that investors need to get their heads around. One is company specific; the other is tied to the broader economy. Assuming things continue as they have been, both are positive. Here are some key things you need to think about with regard to this restaurant chain.
Big numbers last year
Chipotle ended 2021 with a fourth-quarter sales advance of 22%, which is a pretty attractive number -- only for the full year, sales were even higher, up 26.1%. What's really exciting is that these top-line figures aren't coming off of a weak 2020, the year the pandemic hit. In fact, sales rose 11.6% in the final stanza of 2020 and were up 7.1% for that year. So 2021 was really a continuation of a strong trend.
Image source: Getty Images.
People just like to eat at Chipotle. That's backed up by the comparable-store sales increase of 1.6% in 2020 despite the pandemic. And then there's the incredible comp store sales advance of 19.3% in 2021 as the world started to move past the initial pandemic hit.
The restaurant chain has been working hard to meet demand as well. It opened a net 146 new locations in 2020 even while dealing with the pandemic headwinds. In 2021, that number rose to 215. So not only is Chipotle seeing strong demand for its food, but it is also able to expand its geographic reach without materially impacting that demand. That's very impressive.
Handily navigating inflation
That said, as anyone who has bought food out knows, there's another major problem that restaurants are facing -- inflation. It's hitting on multiple fronts, too, with the cost of food, employees, and transportation all on the rise. This is a delicate issue for restaurants, since rising prices can cause a backlash from customers. Simply put, if you charge too much, once-loyal customers will find other options, like brown-bagging lunch instead of eating out.
In mid-December 2021, Chipotle raised prices. It has taken on additional price increases in 2022 as well. The impact so far has been negligible. According to CEO Brian Niccol, the company has been watching its loyalty card customers closely for changes in behavior but have yet to see a material impact from the price hikes. That suggests there could be even more room for price increases down the line if needed.
In fact, Chipotle believes it is in its own space in the fast-food industry because of the product and value proposition it offers. The customization of each meal that's built into the model is a key differentiator that makes Chipotle's food at least appear fresher and more desirable. And the meal portions are sizable, given the cost.
Meanwhile, the price increases are still fairly modest when you look at what a meal costs. Specifically, management highlighted that the chicken burrito and chicken bowl both still cost less than $8 in much of the country.
Incredibly well-positioned
In other words, Chipotle has continued to grow its business at a robust pace even in the face of a pandemic and now inflation. And unless something material changes, there's no reason to believe it won't be able to keep executing well over the coming year. That includes opening new locations, a projection for mid-to-high single-digit same-store sales increases, and the ability to increase prices if inflation continues to run hot. This is an advantaged position that most restaurants do not benefit from today, and it really separates Chipotle from its peers.
Investors should, of course, continue to monitor the company's progress on all of these fronts, but if recent success is any indication, Chipotle isn't slowing down anytime soon.
