Chipotle Mexican Grill Q2 FY’16 Earnings Preview: Recovery In Top-line Likely To Be Weak

+2.49%
Upside
59.28
Market
60.76
Trefis
CMG: Chipotle Mexican Grill logo
CMG
Chipotle Mexican Grill

cmg

2

Key Trends:

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1) Chipotle’s top-line suffered in Q1’16 due to the continued impact of the E.coli controversy.

  • Food, beverage, and packaging costs declined the most, at 35% y-o-y.
  • Average spend per visit fell 8% y-o-y.
  • Comparable restaurant sales were down by a massive 30% y-o-y.

2) Sales recovery initiatives undertaken

  • Aggressive marketing campaign, targeting all of U.S. and Canada.
  • Introduction of new menu items like “Chorizo” and launch of a reward program.
  • Strengthening its digital ordering capabilities.
  • Implemented a food safety protocol.

3) Recovery underway

  • Improvement seen in comparable sales in the month of April due to Easter holidays.
  • Improvement in key measures such as admiration, consideration, first-time visits, and food quality.
  • Q2, seasonally a strong quarter for the company.
  • Marketing costs expected to be 3% – 4% of sales in the upcoming quarters.
  • Transitioning its traffic driving initiatives from freebies to purchase-oriented.

4) Industry-wide comparable sales continue to be weak

  • Same store traffic at -3.5% in April; worst in 2 years.
  • Comp sales at -0.3%, while same store traffic at -2.7% in May.


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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Chipotle Mexican Grill

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