Chipotle Mexican Grill Q3 FY’16 Earnings Preview: Comps Will Remain Under Pressure
Key Trends:
- Chipotle’s top line will continue to suffer as it struggles to restore its comp growth in the aftermath of the continued impact of the E.coli controversy.
- Implemented a food safety protocol and appointed a food safety expert, Dr. Marsden, in order to ensure the quality, hygiene, and nutrition levels of the food it serves.
- The launch of a reward program, Chiptopia, which was heralded as the harbinger of comp and revenue growth, is not showing expected results.
- Chipotle invested 26% more in marketing and promotional activity in the first half of 2016, as compared to the same period last year. The trend will continue, affecting the company’s operating margins adversely.
- A number of sales recovery initiatives have been undertaken in the form of an aggressive marketing campaign, targeting all of the U.S. and Canada, introduction of new menu items like “Chorizo” and the launch of short movies depicting the company’s commitment towards food safety.
- Expansion into Europe could be a potential game changer for the company, given the slowdown in the U.S. If it is able to popularize foods like tacos and burritos in the region, we may see a restoration in its key statistics in the very near future.
- Nomura has revised its forecast for Q3 same-store sales growth to -19.5% vs. -17.9% consensus, due to weaker than expected performance this past quarter and failure of its promotional activities to show significant results.
- An industry-wide slowdown due to a lesser number of people eating out. This is being speculated to happen due to grocery prices lagging behind menu prices, discouraging people from eating out. The trend is confirmed by September CPI data which shows that food at home inflation is -2.2% year on year, while food away from home is +2.4% y-o-y. The high costs of labor and healthcare further worsen the situation for the restaurant industry, by causing people to substitute spending on eating out on more basic necessities of healthcare.
Relevant Articles
- How Did Chipotle Stock Gain 20% This Year Despite Inflationary Headwinds?
- Up 17% This Year, Will Higher Pricing Boost Chipotle’s Stock Post Q2 Earnings?
- Where Is Chipotle Stock Headed Post Stock Split?
- Chipotle Stock Is Up 39% This Year. What’s Happening With The Company?
- Rising 25% Year To Date, Will Q1 Results Drive Chipotle Stock Higher?
- Up 11% Already This Year, Does Chipotle Stock Have More Room To Run After Q4 Results?
Have more questions about Chipotle Mexican Grill (NYSE: CMG)? See the links below:
- Will Chipotle’s Latest Marketing Gimmicks Pay-Off?
- What Impact Can The Continued Fall In Spend Per Visit Have On Chipotle’s Stock Price In The Next Year?
- How Has Negative PR Affected Chipotle’s Operating Efficiency?
- What Can Produce Over 10% Upside To Chipotle’s Stock In The Next Year?
- How Is Chipotle Dealing With The Aftermath Of The E.coli Outbreak?
- Down, But Not Out: Chipotle Returns To Profitability In Q2’16, Despite Weakness In Top Line
- 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
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
See More at Trefis | View Interactive Institutional Research (Powered by Trefis)