Chipotle Fourth-Quarter Net Doubled on 18% Higher Revenue

Chipotle Mexican Grill reported fourth-quarter net income more than doubled as revenue rose 18%, beating analysts' estimates on the top and bottom lines as well as in comparable sales.
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Chipotle Mexican Grill  (CMG) - Get Report reported fourth-quarter net income more than doubled as revenue rose 18%, beating analysts' estimates on the top and bottom lines as well as in comparable sales.

The Newport Beach, Calif., burrito chain also said it was in talks with the Justice Department to settle an inquiry into a norovirus outbreak.

Chipotle earned $2.55 a share in the fourth quarter, compared with $1.15 in the year-earlier quarter.

The latest figure reflects a 31-cent charge for expenses related to legal matters, corporate restructuring and certain other items. The latest adjusted earnings were $2.86 a share. 

Revenue reached $1.44 billion from $1.23 billion. Comparable restaurant sales advanced 13.4%, reflecting Chipotle's eighth straight quarter of higher comparable sales. The average check at restaurants rose 5.4%.

A survey of analysts by FactSet produced consensus estimates of $2.80 a share of profit, or an adjusted $2.76, on $1.4 billion of revenue. The analysts were looking for a rise of 9.8% in comparable sales.

Digital sales leaped 78% and accounted for nearly a fifth of the quarter's total revenue.

Food, beverage and packaging costs at Big Burrito were 33.1% of revenue, down 0.1% from the year-earlier quarter. 

The decline reflected higher menu prices and favorable avocado pricing, partly offset by higher costs of other ingredients, including carne asada, and loyalty-program expenses.

Restaurant-level operating margin was 19.2% in the quarter, up from 17% in the year-earlier quarter. The improvement reflected the comparable-restaurant-sales rise, offset partly by higher salary expense for restaurant staffers and higher expense for food delivery, Chipotle reported.

Legal Matters

Regarding legal matters, the company has reserved an additional $10 million to cover the estimated cost of a U.S. Attorney's Office investigation. The reserve now totals $25 million.

In January 2016, Chipotle said the U.S. Attorney for the Central District of California had served the company with a grand-jury subpoena

The move related to an inquiry by the Justice Department and the Food and Drug Administration into a norovirus outbreak at a Chipotle outlet in Simi Valley, about an hour northwest of Los Angeles.

The company said in its Tuesday statement that the $25 million reserve "is a reasonable estimate of what we may be expected to pay to settle this matter."

For 2020, Chipotle expects comparable restaurant sales to grow in the mid-single digits.

Also for the full year, Chipotle expects to open 150 to 165 new restaurants, with more than half including the Chipotlane drive-throughs. Customers place orders via the app or on the web and pick up their orders in the drive-throughs.

At the end of 2019 the company owned and operated more than 2,600 restaurants in the U.S., Canada, the U.K., France and Germany. Chipotle employs 83,000 people.

At last check Chipotle shares were 1% higher. They closed the regular session on Tuesday up 2% at $884.82.