Q4 2024 Earnings Summary
- Chipotle expects unit growth in the 9% to 9.5% range this year, with a strong pipeline for 2025 and confidence in growing the business in the 8% to 10% range, continuing to drive best-in-class return on investment.
- The company's international expansion is progressing well, particularly with the partnership with Alshaya, which is going really, really well. They have opened 3 restaurants (2 in Kuwait and 1 in Dubai), with plans to expand aggressively in 2025, and are considering other regions like Southeast Asia or Latin America.
- Chipotlanes continue to be successful, generating higher sales and margins. Chipotle is looking to retrofit existing stores where possible because they know there's a return on investment.
- Chipotle is expecting flat comparable sales in Q1 2025 due to tough comparisons, weather impacts, and calendar shifts, and has guided to a low to mid-single-digit comp for the full year, indicating a potential slowdown in growth momentum.
- Increased cost pressures from commodity inflation, higher usage to ensure generous portions, and inflation in avocados and dairy have led to declining restaurant-level margins, which are expected to face pressure in the first half of 2025, potentially impacting profitability.
- Potential additional costs from new tariffs on items imported from Mexico, Canada, and China could have an ongoing impact of about 60 basis points on cost of sales if fully implemented, posing risks to margins if not offset.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +13% | The $2.845 billion in revenue growth was primarily driven by new restaurant openings and a 6% increase in comparable restaurant sales, aided by market demand for convenient dining options and increased digital orders. Sustained consumer interest, along with ongoing efforts to optimize operations, suggests further revenue growth potential. |
Food & Beverage | +13% | The $2.830 billion figure benefitted from higher sales volumes and menu price increases but was partially offset by ingredient cost inflation in items like avocados and dairy. Company initiatives to maintain consistent portion sizes and strong marketing campaigns also supported sales, although rising commodity prices remain a challenge. |
Delivery Service | -8% | The decline to $15 million largely reflects customers increasingly opting for pickup and drive-thru (Chipotlane) channels, which offer lower fees and shorter wait times. Elevated third-party delivery costs and a strategic focus on order-ahead convenience have contributed to a shift away from delivery. |
Operating Income (EBIT) | +14% | The increase to $416 million stemmed from higher sales leverage, stable labor costs as a percentage of revenue, and efforts to optimize restaurant-level margins. While inflation remains a risk factor, ongoing cost-management strategies helped offset rising cost pressures. |
Net Income | +18% | Net income rose to $332 million, reflecting improved profitability from continued sales growth and moderate expense control. A slightly lower effective tax rate and benefits from stock-based compensation adjustments also contributed to the upswing, positioning the company for stronger earnings potential in upcoming quarters. |
EPS (Diluted) | -98% | The drop to $0.24 is primarily attributable to non-operational items such as unusual stock-based compensation expenses and one-time charges recorded in the current period. Though overall operating performance remains strong, these accounting factors significantly reduced the reported diluted EPS. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Comparable sales growth | FY 2024 | no prior guidance | mid- to high single-digit range | no prior guidance |
Effective tax rate | FY 2024 | no prior guidance | 24% to 26% | no prior guidance |
Transaction comps | Q4 2024 | no prior guidance | modest acceleration vs. Q3 | no prior guidance |
Cost of sales | Q4 2024 | no prior guidance | just above 31% | no prior guidance |
Labor costs | Q4 2024 | no prior guidance | low 25% range | no prior guidance |
Other operating costs | Q4 2024 | no prior guidance | low 14% range | no prior guidance |
Marketing costs | Q4 2024 | no prior guidance | low 3% range | no prior guidance |
G&A | Q4 2024 | no prior guidance | $163M total (incl. $130M underlying, $28M stock comp, etc.) | no prior guidance |
Depreciation | Q4 2024 | no prior guidance | step up slightly | no prior guidance |
Same-store sales (comps) | FY 2025 | no prior guidance | low to mid-single-digit range | no prior guidance |
Labor costs | Q1 2025 | no prior guidance | high 24% range; mid-single-digit wage inflation | no prior guidance |
Labor costs | Q2–Q4 2025 | no prior guidance | low single-digit wage inflation | no prior guidance |
Cost of sales | Q1 2025 | no prior guidance | high 29% range | no prior guidance |
Marketing costs | Q1 2025 | no prior guidance | below 3% of sales | no prior guidance |
Marketing costs | FY 2025 | no prior guidance | mid-2% range | no prior guidance |
Other operating costs | Q1 2025 | no prior guidance | low 14% range | no prior guidance |
G&A | Q1 2025 | no prior guidance | total ~$179M (incl. ~$135M underlying, $33M stock comp, etc.) | no prior guidance |
Depreciation | FY 2025 | no prior guidance | ~3% of sales | no prior guidance |
Effective tax rate | FY 2025 | no prior guidance | 25% to 27% range | no prior guidance |
Incremental margins | 2H 2025 | no prior guidance | high 30% to low 40% range | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Cost of Sales | Q4 2024 | "Just above 31%" | 30.45% (866,252 / 2,845,310) | Beat |
G&A | Q4 2024 | "Around $163 million" | $191.2 million (SG&A line item) | Missed |
Depreciation | Q4 2024 | "Step up slightly from Q3 2024 (84,349)" | 83,876(Slightly lower than Q3 2024's 84,349) | Missed |
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Comps Guidance and Trajectory
Q: How will comps trend throughout the year?
A: Management expects low to mid-single-digit comps for the full year. They anticipate flat transaction comps in Q1 due to tough comparisons from last year's promotions and external factors, but expect improvement in Q3 and Q4 to achieve their guidance. -
Pricing Strategy
Q: Will you take additional pricing this year?
A: They plan to maintain pricing at around 2% for 2025, aligning with current inflation levels. Additional price increases are not planned but could be considered if permanent inflation arises. -
Margin Outlook
Q: What is your outlook on restaurant-level margins?
A: They aim to drive positive transactions to improve margins. Temporary margin pressure is expected in the first half due to portion investments, with offsets planned in the second half from efficiency gains and supply chain improvements. -
Unit Growth Plans
Q: What might prevent you from reaching higher unit growth in fiscal '25?
A: Challenges like permitting could limit growth, but they expect to achieve 9% to 9.5% growth this year and are confident in growing the business in the 8% to 10% range long-term, with a strong pipeline for 2025 and beyond. -
Labor Market Conditions
Q: How is the current labor market affecting you?
A: They are experiencing all-time high staffing levels and record-low retention rates, attributed to best-in-class wages, benefits, and a strong culture. No significant labor market changes are impacting operations. -
Sales Drivers Beyond LTOs
Q: What initiatives will drive sales besides LTOs?
A: They focus on improving operations, marketing, and digital strategy. Efforts include enhancing guest experience, increasing throughput with back-of-house modernization, and leveraging digital tools like AI assistants for customer engagement. -
International Expansion
Q: How are international markets performing?
A: Restaurant-level margins have improved significantly in the UK, prompting plans to develop sites in Western Europe. Management is confident in expanding to hundreds of restaurants in the region and potentially thousands in adjacent markets. -
Supply Chain and Costs
Q: How are supply chain factors like avocado prices affecting you?
A: Cost of sales improved as avocado price increases were less than expected. They diversified sourcing, now obtaining only 50% of avocados from Mexico, which mitigates tariff impacts estimated at about 6 basis points if sustained. -
Marketing Spend
Q: Why is marketing spend as a percentage of sales lower?
A: Marketing spend is in the mid-2% range, slightly lower than historically, but total dollars spent have increased by 8% to 8.5% year-over-year. They seek leverage without passing all cost increases to marketing expenses. -
Throughput and Efficiency Improvements
Q: What are you doing to improve throughput?
A: Investments in back-of-house innovations and equipment aim to enhance efficiency, particularly in morning prep cycles. This will enable better staffing during peak times and create a step change in throughput improvement.