Chipotle Ends Fiscal Year 2018 Strongly, Will It Continue The Growth in 2019?

Chipotle Mexican Grill (NYSE: CMG) reported quarter 4 and Full year results for the Fiscal year 2018 recently. In the first 3 quarters the company had done well on comparable sales improvement and net new stores openings, this trend continued in the 4^th quarter, too, with the company posting the highest quarterly comparable sales increase for the fiscal year. The company beat consensus estimates for the 4^th quarter with Non-GAAP EPS and revenue. The full year revenue was up by 8.6% and was recorded at $4.86 billion while earnings were recorded as $6.35, up by 2.6%.

We have estimated CMG’s price to be $468. The charts have been made using our new, interactive platform. The various driver assumptions can be modified by clicking here for our interactive dashboard on Our Outlook For Chipotle in FY 2019, to gauge their impact on the earnings and price per share metric. In addition, all Trefis Consumer Staples Data is here.

Factors That May Impact Future Performance:

1. CEO Change: Brian Niccol joined CMG as its new Chief Executive Officer (CEO), effective from March 5, 2018. Niccol came from Yum! Brands where he was the CEO of Taco Bell. He was instrumental in implementing a successful turnaround of that business. Niccol comes with strong expertise in digital technologies, restaurant operations, and brand building, and these skills are crucial for Chipotle’s turnaround. In the 3 quarters post his inculcation the company has done quite well.
2. Accelerating Digital Sales: This is the fastest growing part of CMG’s business, with annualized digital sales exceeding $0.5 billion accounting for 10.9% of total sales. This segment reported growth of 66% in the fourth quarter. The company’s ‘Digital Pick Up Shelf’ initiative, which is now in 1000 restaurants, not only provides a faster and a more convenient experience for mobile pick up orders, it also serves as an in-store marketing tool to raise awareness among its customers that they don’t have to go through the line to pick up their orders. The company plans to get them in all restaurants by the middle of 2019.
3. Adding Catering and Delivery: Catering forms roughly 1% of the total sales, and is a largely untapped opportunity for the company. CMG has expanded its delivery availability to 1,800 restaurants, and expects to reach 2,000 by the end of the year. The company has noted that mobile and delivery orders are in that $16 to $17 range, while the traditional check is roughly $12. Since the company’s delivery sales continue to grow at a fast pace (13x in quarter 4 year on year), CMG intends to expand the number of delivery partners it works with.
4. New Restaurant Openings: CMG opened 40 new restaurants in Q4 and came to a total of 137 new openings for the full year. Moreover, the company has plans for a higher number of openings for 2019, about 140 to 155. New restaurant openings can have a significant positive impact on the company’s revenues. Meanwhile, the company is also in the process of closing 55 to 65 under-performing restaurants.
5. New Menu Items: The company is also testing a number of menu items in order to build a pipeline for future years. These include quesadillas, nachos, bacon, lemonade, and a Mexican chocolate milkshake, and limited time offers such as chorizos.

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