The Denver-based burrito chain said late Thursday that fourth-quarter comparable restaurant sales were up 9.3% year-over-year, double the growth rate a year earlier and far exceeding the 6.7% rise anticipated by estimates provider Consensus Metrix.
Chipotle said fourth-quarter net income jumped 29.8% to $79.6 million, or $2.53 a share, in line with the consensus estimate. Revenue of $844.1 million beat expectations among analysts polled by Thomson Reuters by $17.8 million and were up 20.7% from the fourth quarter of 2012, driven by increased traffic in stores.
Looking ahead, management expects 2014 comparable restaurant sales growth in the low to mid single-digit range, excluding menu price increases.
Earlier this week, Chipotle launched "Farmed and Dangerous," a satirical comedy series that will be on Hulu and Hulu Plus starting Feb. 17 that "explores the world of industrial agriculture in America."
This four-episode series is sure to be filled with suspense and plenty of entertainment, all while attempting to show Chipotle's view on sustainable agriculture and against genetically modified foods. Chipotle said last year that it was moving to a GMO-free menu, which could place pressure on food pricing and is one of the reasons it's been hinting at a menu raise.
TheStreet's Jim Cramer is a fan of Chipotle."Lots of times people ask me how a stock can jump so much in one particular day. Usually I have to talk about gross margin inflection points or shrinking to grow or some sort of fancy explanation involving a cut in capital expenditures at the same time as an acceleration in revenue," Cramer wrote in an article, Chipotle's Simple Winning Ways. "Then Chipotle will come along and make it all so easy. It just sold a ton more burritos than you thought it could."
Here's what others on Wall Street are saying about Chipotle today:
Lynne Collier, Sterne Agee (Buy; $603 PT)
"We continue to believe that CMG has the best business model created in the restaurant industry to date. Despite weather, same-store sales accelerated to 9.3% in 4Q and underlying trends remain similar in 1Q thus far. Overall, we believe the continued sales momentum is a testament to the strength of the Chipotle model. Assuming a price increase in late '14, we see margin expansion further driving earnings, and we continue to believe that the runway for unit growth remains vast."
"Menu Price Update: While a menu price increase is not certain, management indicated that with food costs at current levels, it is likely that the Company will increase prices in 3Q. We expect the Company to time the price increase along with the adoption of exclusively GMO-free ingredients, which should be in place by the end of FY14. We continue to believe a price increase would be in the range of 3-5% and that an increase in the 4% range could drive restaurant-level margins higher by approximately 250 bps (to record levels). We continue to believe that CMG has significant pricing power as we believe that the brand's menu pricing is below its peers."
Stephen Anderson, Miller Tabak (Hold: $510 FV)
"Our three-part bullish thesis on CMG remains intact: (1) mid-to-high-single-digit comps supported by steady traffic growth; (2) more moderate food costs, which combined with a 3Q14 menu price increase we think will fuel margin expansion; and (3) a robust new unit pipeline. However, given the recent rally that has more than doubled CMG's share price in the past 18 months, we see limited near-term upside in CMG shares. We recommend investors seeking exposure to the growing fast casual segment consider moving into Panera Bread (PNRA), which after a tough 2013 is seeking to implement many of the same throughput-driving measures CMG has undertaken in recent quarters."
"We think the most important positive coming out of the release was that traffic actually accelerated more than anticipated in 4Q13. The 9.3% comp increase registered in theDecember quarter, which marks an acceleration from the 4.2% average comp pace in the firstthree quarters of 2013, was achieved not only in the face of an arguably cloudy consumer/retailenvironment and (toward the end of the quarter) harsher December weather than in the pastcouple of years, but also without any menu price increase.
"Moreover, CMG continued to reap thebenefits of ongoing initiatives to boost the number of customers served during peak periods (i.e.,'throughput'); we estimate increased throughput added as much as 130-150bps to 4Q13 comps,above the 100-110bps these initiatives added in 3Q13, and yesterday the company announcedan additional $10 million in restaurant-level IT spending to support additional sales initiatives,including (eventually) mobile payments. We argue this has positive implications for PNRA, whichis seeking to implement some of CMG's strategies (e.g., reallocating staff to expedite ordersduring peak periods, higher technology spending) to increase throughput."
John Ivankoe, JPMorgan (Neutral: $550 PT)
"Following 4Q earnings, CMG's stock should be up significantly today given a phenomenal 9.3% comp vs. our 7% estimate, as well as management commenting that 'sales were better in December than November' and 'underlying traffic is in [the] same ballpark' in January. The number and comments are stunning for several reasons: 1) the company had guided 4Q comps "similar or slightly better than" the 6.2% in 3Q, 2) the casual dining industry saw comps of flat, down 1.5% and down 3.8% from October-December, respectively, based on KnappTrack, and 3) Starbucks (SBUX) noted a weak December drove slower Americas comps in C4Q (5% vs. 8% in C3Q and a 300bp two-year deceleration). We simply did not anticipate that such an improvement from 3Q to 4Q was probable for the brand."
"Given comments on sustained traffic momentum, we take up comp estimates.Our revised estimate in 1Q is 10% including a point benefit from Easter shift into 2Q, 2Q is 8%, and 2H is 8%, including the expectation of 4% pricing taken in 3Q14. We note that the company did not rule out potentially pushing out price increases further than even 2014 if commodity inflation becomes more benign. Our 1H expectation includes a point benefit in mix from catering."
--Written by Laurie Kulikowski in New York.