Chipotle Mexican Grill (CMG +1.61%) has been an investor favorite for years, but it received special attention this year after announcing a 50-for-1 stock split. That's one of the biggest splits ever, and with the shares' four-figure price tag prior to the split, it made a lot of sense.
It went through in June, and Chipotle stock dropped slightly afterward. It trades at $57.50 per share as of this writing, but that's still a 26% gain year to date. What else can investors expect after the split?
Higher sales
Chipotle reliably reports double-digit sales growth quarterly, and it's usually driven by new stores and growth in comparable-store sales (comps). Revenue increased 14% year over year in the 2024 first quarter with a 7% increase in comps. Management is guiding for similar results for the full year.
It has standard tactics that it usually employs to drive revenue at various times, including menu innovation and marketing campaigns for specific food items. It also regularly offers limited-time options and specials to generate interest and engagement.
Higher profits
Expenses as a percentage of sales decreased year over year in the first quarter, mostly as a result of price increases. The company has its finger on the pulse of what its customers like and what they're willing to pay for. Management has successfully raised prices to counter the impact of rising costs without curbing demand.
The Wall Street analyst consensus for full-year earnings per share (EPS) is $1.12, up from a split-adjusted $0.90 in 2023.
More stores
Management thinks that it can double its current store count (about 3,500) in North America alone, with plenty of potential to expand internationally. It opened 47 stores in the 2024 first quarter, including 43 with a Chipotlane, or drive-thru.
That's important because Chipotlanes address consumer pain points. As the digital world has become a more present part of our lives, the ability to order and pick up with a drive-thru powers trust, engagement, and ultimately sales.
For all of 2024, the company expects to open between 285 and 315 stores -- more than the 271 it opened last year -- with 80% having a Chipotlane.
Management has said it will focus on suburban areas and international locations. It recently announced its first-ever franchise agreement for stores in the Middle East, and it opened a Kuwait location in April. It plans to open in Dubai later this year and have a total of four regional restaurants by the end of 2024.
These won't necessarily add tons of revenue to the total, but it's an experiment that could lead to further international openings. There are advantages to keeping all of the stores company owned, such as more control over the food, but there are advantages to expanding the franchise business, such as widening margins.
Happy investors
Nothing has changed in Chipotle's performance or potential since the split, but some of its year-to-date gains were based on stock-split hype. The price is slightly down since, and its valuation is more in line with recent levels.
NYSE: CMG
Key Data Points
That means it's in a good position to start climbing again. There are no guarantees, but there's no reason to think anything should change in the back half of the year.
Chipotle runs an excellent business and has excellent prospects. In any case, investors should focus on the long term, and the company has plenty of room to run over many years.
