Chipotle (CMG 1.43%) reported first-quarter fiscal 2022 earnings after the markets closed on Wednesday, April 26. The fast-casual restaurant chain delivered healthy revenue growth as consumers returned to dining at restaurants.
That follows shutdowns during the pandemic when Chipotle had to rely almost entirely on delivery and pick-up orders. Interestingly, despite the return of in-person dining, digital sales remain robust. Let's look closer at the quarters' results.
Revenue growth continues for Chipotle
In its first quarter, which ended March 31, total revenue increased by 16% to hit $2 billion. That amounts to seven straight quarters of double-digit revenue growth. Fueling this growth in the recently completed quarter was the return of folks to restaurants. Indeed, in-restaurant sales increased by 33% compared to the same quarter a year earlier.
The figure was especially impressive considering the omicron variant caused coronavirus cases to surge in the first couple of months in 2022. "Chipotle's performance in the first quarter was strong, despite challenges from the Omicron variant and ongoing inflation," said Brian Niccol, chairman and CEO of Chipotle.
For the second quarter, management expects the momentum to continue and is forecasting sales growth of about 11% on a comparable-store basis (which excludes the impact of new store openings and closings).
Further helping revenue growth are menu price increases that the company has been phasing in over the last few quarters. Like many other businesses, Chipotle faces rising costs on everything from labor to paper to beef. To counter some of those input cost rises, the restaurant chain has increased menu prices. The good news for shareholders is that consumers still choose Chipotle despite the increases.
The excellent results gave management confidence to reiterate its target of more than doubling restaurant locations in North America. As of March 31, it had 3,014 locations, and that is expected to grow to over 7,000 in the long run. In the March quarter, Chipotle added 51 restaurants. Investors can be encouraged with the long-term plans.
Impressively, Chipotle's per-restaurant sales are consistently rising. Average restaurant sales rose to $2.6 million from $2.3 million in the same quarter of the prior year. The boost in average sales per restaurant despite adding locations indicates that the additions are not cannibalizing existing restaurants and gives management's target of 7,000 locations more credence.
What this could mean for Chipotle investors
Chipotle's stock is down 14% year to date as investors are concerned about rising costs and their effects on Chipotle's bottom line. Still, the shares are not cheap. Healthy sales growth in the first quarter is another step in the right direction for the restaurant chain. That said, investors would be prudent to wait for a further pullback in the stock price before acquiring shares.