Down, But Not Out: Chipotle Returns To Profitability In Q2’16, Despite Weakness In Top Line
Chipotle Mexican Grill (NYSE: CMG) released its June quarter earnings on 21st July, 2016. Although the top-line continued to suffer, Chipotle reported a return to profitability for the first time since the E.coli controversy.
Chipotle’s revenues were down 17% on an annual basis, despite its efforts at re-branding itself and improving its reputation with initiatives like Food With Integrity. The company maintained a strict control over its operating expenses, improving them 2% y-o-y in absolute terms, helped by lower commodity prices. However, as a percentage of revenue, operating expenses continued to be higher, likely due to heavy spending on advertising and marketing campaigns that Chipotle has undertaken to restore its brand image.
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Earlier in the year, Chipotle had disclosed plans to grow its top-line through new store openings, and increasing store sales using promotional offers and reward programs. The comparable store sales data has been in the red for the company since a series of contamination events hit its outlets last year. However, Chipotle’s marketing efforts and decision to introduce a new menu item,”chorizo,” somewhat paid-off, as it saw a 5 percentage point improvement in comparable store sales growth in Q2’16.
Furthermore, the company said it will be continue to concentrate on spending on promotional offers as it tries to win back its customers. The launch of Chiptopia reward program is a step in this direction. With more than 3.6 million participants and approximately 30% of all transactions occurring through Chiptopia, it is to be a big part of the company’s strategy, going forward.
Have more questions about Chipotle Mexican Grill (NYSE: CMG)? See the links below:
- Chipotle Mexican Grill Q2 FY’16 Earnings Preview: Recovery In Top-line Likely To Be Weak
- Chipotle Mexican Grill Struggles in Q1 FY’16 As Last Year’s E.coli Controversy Impacts Comparable Sales
- Chipotle Mexican Grill FY 2015 Earnings Review: E.Coli Scandal Hinders Top-line Growth
- What’s Chipotle Mexican Grill’s Fundamental Value Based On Expected 2016 Results?
- What Is Chipotle Mexican Grill’s Revenue and EBITDA Bridge?
- How Has Chipotle Mexican Grill’s Operating Metrics Changed Over 2011-2015?
- Where Will Chipotle Mexican Grill’s Revenue and EBITDA Growth Come From Over The Next Three Years?
- Chipotle Mexican Grill Q1 FY’16 Earnings Preview: E.coli Scandal Might Still Impact Top-line Growth
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