VALUATION HIGHLIGHTS
- Company Operated Restaurants constitute 97% of the Trefis price estimate for Chipotle's stock.
WHAT HAS CHANGED?
Chipotle FY 2024 Snapshot
Chipotle's revenue grew 15% year-over-year to $11.3 billion in FY 2024, driven by a 7.4% increase in comparable-restaurant sales. This increase is attributed to higher transactions of 5.3% and a 2.1% increase in average checks. Digital sales continue to be strong, accounting for 35% of the core food and beverage business. The company's operating profit has increased by 23% y-o-y, outpacing sales growth, thanks to expanding operating margins. Chipotle's operating margin rose 110 basis points y-o-y to 16.9% in FY 2024, resulting in a 25% y-o-y in diluted earnings per share to $1.11.
Looking Ahead
Chipotle anticipates low to mid-single-digit comparable sales growth for the full year 2025. The company plans to open 315-345 new locations in 2025, with over 80% featuring a Chipotlane.
The company expects 2025 sales to be negatively impacted by weather-related events such as the Los Angeles wildfire. Looking ahead, Chipotle may encounter increased competition from established fast-food chains, such as McDonald's and Domino's, particularly in the drive-thru segment.
50-for-1 Stock Split
Chipotle stock underwent a 50-for-1 split in June 2024, with investors gaining 49 new shares for each one they owned before the split - making the stock more accessible to a wider range of investors by trading at a lower price.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Chipotle's value that present opportunities for upside or downside to the current Trefis price estimate for Chipotle:
Company Operated Restaurants
Number of Restaurants : The company is still able to add new restaurants, and increase its in-restaurant sales - illustrating that the additions are not cannibalizing existing locations. The company saw the addition of net 59 stores between the end of 2022 and 2024. We continue to expect an average of 5% growth in stores each year over our forecast period.
Average Revenue Per Restaurant : We expect the company's revenues to grow at a steady pace over our forecast period, with average restaurant sales growing at around 6% over our forecast period.
For additional details, select a driver above or select a division from the interactive Trefis split for Chipotle at the top of the page.
BUSINESS SUMMARY
Chipotle Mexican Grill is a chain of restaurants operating in the casual dining segment, which specializes in serving Mexican cuisine. As of Dec 31, 2024, the company operated 3,644 throughout the United States and 82 international Chipotle
restaurants. Additionally, it had three international licensed restaurants. Notably, 257 of the 304 new locations added in FY 2024 feature a Chipotlane, a dedicated lane for digital order pickup, which also contributes to its margin expansion.
Chipotle's menu comprises Mexican fare with a few things that can be mixed and matched with various sauces and ingredients such as salsa, guacamole, cheese, and lettuce, to make one's dishes. The menu primarily consists of Tacos, Burritos, Salads, and Burrito Bowls (Burritos without the Tortilla).
Chipotle operates on the "Food with Integrity" principle, offering naturally raised pork, chicken, and beef. Naturally raised implies that the animals are raised in open pastures and are fed on a purely vegetarian diet without any added hormones or antibiotics.
Chipotle's objective is to provide a fine dining experience in a quick-service setup and to provide quality food and ambiance without having the customer wait too long. Some Chipotle restaurants can serve up to 300 customers an hour.
Chipotle competes with restaurants in the casual dining segment such as Applebee's, Qdoba, Taco Bell, and Chili's, among others. It also competes with fast-food restaurants such as McDonald's, Burger King, Subway, and KFC.
SOURCES OF VALUE
Chipotle's business is wholly dependent on company-operated restaurants, which explains the significance of this division to its stock.
Higher average spend per customer than competitors
Chipotle enjoys a higher average spend per customer than most of its competitors, given its high quality of food. For example, in McDonald's, the average spend per customer is around $9, whereas the corresponding figure in Chipotle is about $11-12. The company has successfully marketed itself as a restaurant serving natural, hygienic, and organic food in an upscale ambiance, for which the consumers are often ready to pay a slight premium.
Another reason why the company enjoys a higher average spend per customer is that it has restaurants only in developed countries, where the average spend is usually higher than in developing countries. Most of the fast-food restaurant chains have a mix of restaurants in developed and developing countries, which has a lower effect on the overall spending per customer.
KEY TRENDS
Organic and healthier food gaining importance in the U.S.
Consumers have become more health-conscious, and there is an increase in demand for natural and healthier food. Using its 'Food with Integrity campaign, Chipotle has aggressively marketed itself as a restaurant using only naturally raised meat.
International Expansion Story
Chipotle's international growth story is still in its early stages, with less than 50 locations established across the U.K., France, and Germany, and a recent entry into Kuwait. The global success of companies like McDonald's, which operates over 40,000 restaurants worldwide, underscores the significant potential for Chipotle's international expansion.
