What happened
Shares of Chipotle Mexican Grill (CMG 6.33%) were soaring today after the burrito roller served up a piping-hot first-quarter earnings report, easily beating estimates on both the top and bottom lines.
As of 11:59 a.m. ET on Wednesday, the stock was up 14.5%.
So what
Chipotle delivered impressive results across the board. Comparable-restaurant sales (comps) were up 10.9%, driving a 17.2% increase in revenue to $2.37 billion, which topped expectations at $2.34 billion, but the margin improvement in the quarter was what really delighted the market.
Restaurant-level operating margin rose from 20.7% to 25.6% thanks to price increases, improving leverage from higher sales, lower delivery costs, and lower avocado prices.
The company also benefited from lapping the peak of the Omicron variant a year ago, which helped in-restaurant sales rise 22.9%. Digital sales represented 39% of revenue, showing they remain a substantial part of the business. The company also continues to lean on its Chipotlane drive-thru strategy, opening 41 new locations in the quarter, 34 of which had a Chipotlane.
Overall operating margin improved from 9.4% to 15.5%, and earnings per share jumped 84% to $10.50, easily beating the consensus at $8.92.
CEO Brian Niccol said, "Our strong performance in the first quarter confirms that our focus on getting back to the basics and reestablishing Chipotle's standards of excellence is beginning to drive results."
Now what
Looking ahead, management called for comps growth in the mid single digits to high single digits for both the second quarter and the full year, and it expects to open 255 to 285 new restaurants, increasing its store base by about 8%.
The stock trades at a premium, with a price-to-earnings ratio of 54, but this earnings report helps show why it deserves a high multiple. The company still has a large market to penetrate, with just over 3,000 restaurants so far and little standing in the way of its growth.
