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Chipotle Beats on Earnings and Revenue; Margin Thinner

Chipotle beat third-quarter estimates. Digital sales tripled year over year. Operating margins narrowed.
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Chipotle Mexican Grill  (CMG) - Get Chipotle Mexican Grill Inc. Report beat Wall Street's third-quarter earnings expectations, but the shares were falling as the restaurant chain posted thinner operating margins.

Shares of the Newport Beach, Calif., burrito chain at last check were falling 4.4% to $1,307.

Chipotle reported third-quarter net income of $80.2 million, or $2.82 a share, compared with $98.6 million, or $3.47, in the year-earlier period. Excluding special items, the company reported earnings of $3.76 a share, beating the consensus estimate of $3.47 in a FactSet survey.

Revenue increased 14.1% to $1.6 billion, ahead of FactSet's forecast of $1.59 billion. 

Digital sales tripled year over year to $776.4 million, representing 48.8% of total sales. About half the digital sales were via delivery, Chipotle said, with the rest coming from order-ahead transactions. 

Same-store sales increased 8.3%, a percentage point stronger than the FactSet estimate. Comparable restaurant sales were strong in each month of the third quarter with August being the high point.

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Restaurant-level operating margin was 19.5%, narrowed from 20.8% a year earlier and driven primarily by coronavirus-related effects. 

These included higher delivery expense associated with increased delivery sales, elevated beef prices, increased incidence of steak, and fewer sales of high margin beverages.

The company opened 44 restaurants during the third quarter and closed three, bringing the total count to 2,710.

As of Sept. 30, Chipotle had $1.1 billion in cash, investments and restricted cash, and no debt, along with a $600 million untapped credit facility. 

"As a result of a strong brand, committed employees, and broad financial strength, we remain excited about Chipotle's powerful economic model and our long-term potential," Brian Niccol, chairman and CEO, said in a statement.

Chipotle declined to provide fiscal 2020 guidance due to uncertainty created by the pandemic.