Chipotle Mexican Grill's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Chipotle Mexican Grill (CMG)

Q4 2011 Earnings Call

February 01, 2012 4:30 pm ET

Executives

Alex Spong -

M. Steven Ells - Founder, Chairman of the Board and Co-Chief Executive Officer

Montgomery F. Moran - Co-Chief Executive Officer, Secretary and Director

John R. Hartung - Chief Finance Officer and Principal Accounting Officer

Analysts

David E. Tarantino - Robert W. Baird & Co. Incorporated, Research Division

Michael Kelter - Goldman Sachs Group Inc., Research Division

Paul Westra - Cowen and Company, LLC, Research Division

Jason West - Deutsche Bank AG, Research Division

Joseph T. Buckley - BofA Merrill Lynch, Research Division

Sara H. Senatore - Sanford C. Bernstein & Co., LLC., Research Division

Jeffrey Andrew Bernstein - Barclays Capital, Research Division

John S. Glass - Morgan Stanley, Research Division

Presentation

Operator

Compare to:
Previous Statements by CMG
» Chipotle Mexican Grill's CEO Discusses Q3 2011 Results - Earnings Call Transcript
» Chipotle Mexican Grill's CEO Discusses Q2 2011 Results - Earnings Call Transcript
» Chipotle Mexican Grill's CEO Discusses Q1 2011 Results - Earnings Call Transcript

Good afternoon, and welcome to the Chipotle Mexican Grill Fourth Quarter 2011 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to introduce Chipotle's Director of Investor Relations, Alex Spong. You may begin your conference.

Alex Spong

Thank you. Hello, everyone, and welcome to our call today. By now you should have access to our earnings announcement released this afternoon for the fourth quarter and full year 2011. It may also be found on our website at chipotle.com in the Investor Relations section.

Before we begin our presentation, I will remind everyone that parts of our discussion today will include forward-looking statements as defined in the Securities laws. These forward-looking statements will include projections of the number of restaurants we intend to open, comp restaurant sale increases and food cost trends, margins, effective tax rates, return on investment, investment cost, capital expenditures and shareholder returns, as well as other statements of our expectations and plans. These statements are based on the information available to us today, and we are not assuming any obligation to update them. Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements.

We refer you to the risk factors in our annual report on Form 10-Q and Form 10-K as updated in our subsequent 10-Qs, for discussion of these risks. Our discussion today will also include non-GAAP financial measures, the reconciliation of which can be found on the presentation page of the Investor Relations section of our website. I'd like to remind everyone that we have adopted a self-imposed quiet period, restricting communications with investors during that period. The quiet period begins on the first day of the last month of each fiscal quarter and continues until the next earnings conference call.

For the first quarter, it will begin on March 1 and continue to our first quarter release in April.

On the call with us today are Steve Ells, our Chairman and Co-Chief Executive Officer; Monty Moran, Co-Chief Executive Officer; and Jack Hartung, Chief Financial Officer.

And with that, I'll turn the call over to Steve.

M. Steven Ells

I'm pleased with our fourth quarter results and our performance throughout 2011. In a year where we saw only modest improvement in the economy, along with pressure from rising commodity costs, we were able to grow our revenue 23.7% to $596.7 million during the fourth quarter and 23.6% to $2.27 billion for the year. We posted same-store sales growth of 11.1% during the quarter and 11.2% for full year. In our restaurant-level margins, we're 26.1% for the quarter and 26% for the full year, among the highest in the industry.

Our performance is a direct result of our continued focus on just a few things: strengthening our food culture, which is aimed at finding the very best ingredients we can; our ongoing quest for more sustainable sources for all of our ingredients that we use; and our commitment to preparing food in our restaurants using classic cooking techniques; and our people culture, which is stronger than ever, as our top-performing employees continue to develop into inspiring future leaders of our company.

While our primary focus is on building the Chipotle brand in the U.S., we're making small investments now in what we believe will become potential growth opportunities in the future. To this end, we plan to open a second ShopHouse restaurant in Washington D.C. market later this year. ShopHouse Southeast Asian Kitchen is a product of our belief that Chipotle's success has never really been about serving burritos and tacos. But rather, it's due to our commitment to serving the best-tasting food prepared using classic cooking techniques, building restaurant teams of top-performers who are empowered to create a unique and special restaurant experience and designing restaurants that are functional, appealing and that say something about the food we serve. Like Chipotle, ShopHouse embraces all of these ideals.

We're pleased with the performance of the first ShopHouse since it opened in September. While we're still working to perfect the concept, it reminds me very much of the first Chipotle when it originally opened. Many current customers aren't quite sure how the system works or what to order when they first come in and sometimes have issues with flavor combinations or the level of spice in their food. But they like it and from the very beginning, you see that the customers are coming back, week after week. So we've decided to open a second restaurant, which is opened sometime in the second half of this year.

We're also continuing to see future growth opportunities in Europe. In September, we opened our second restaurant in London on Baker Street and have 2 more under construction now, both of which are slated to open during the second half of the year. And our first restaurant in Paris is set to open this spring.

Monty and I just visited Europe last month to get a sense of how our restaurants in London are doing and to check on the status of Paris and to spend time with our talented teams there. While it's very early in our development in Europe, we both saw some very encouraging things during the trip. The restaurants in London are running extremely well. The food is as good as our best restaurants here in the U.S. The crews have been developed by 2 of our restaurateurs and provide us the future leadership we need to open additional restaurants and the experience our customers are enjoying is extraordinary.

Read the rest of this transcript for free on seekingalpha.com