Chipotle Mexican Grill(CMG) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Sales grew over 6% to reach $2.9 billion, including a comparable sales decline of 0.4% [8][44] - Digital sales represented 35.4% of total sales [8] - Restaurant-level margin was 26.2%, a decrease of 130 basis points year over year [8][44] - Adjusted diluted earnings per share was$ 0.29, representing 7% growth over last year [8][44] - Cost of sales increased to 29.2%, up about 40 basis points from last year [47] - Labor costs for the quarter were 25%, an increase of about 60 basis points from last year [51] Business Line Data and Key Metrics Changes - The company opened 57 new restaurants, including 48 Chipotle lanes [8] - The average cost of a popular entree is still under $10, which is about 20% to 30% below comparable fast-casual meals [15] - New restaurant economics remain strong, with year two cash-on-cash returns around 60% [38] Market Data and Key Metrics Changes - The company is facing a slowdown in consumer spending, impacting transaction trends [10][11] - Current underlying trends would result in a low single-digit full-year comparable sales growth [12] Company Strategy and Development Direction - The company focuses on five key strategies: successful restaurant operations, technology and innovation, brand visibility, people leadership, and expanding access through new restaurant openings [12][13] - The company aims to expand to 7,000 restaurants in the US and Canada [37][42] - Marketing plans will ramp up in the summer to enhance visibility and relevance [30] Management's Comments on Operating Environment and Future Outlook - Management noted that elevated consumer uncertainty is impacting spending habits, leading to a slowdown in transaction trends [10][11] - The company remains optimistic about returning to positive transaction growth in the second half of the year [12][46] - Management emphasized the strength of the Chipotle brand and its value proposition [11][63] Other Important Information - The company has a strong balance sheet with$ 2.1 billion in cash and no debt [55] - The board authorized an additional $400 million for share repurchase [55] Q&A Session Summary Question: How does the company view competition in the fast-casual space? - Management expressed confidence that competition does not materially impact their business, often seeing increased traffic in areas with new competitors [62][63] Question: What is the impact of tariffs on new store CapEx? - Management indicated that tariffs could lead to a mid-single-digit increase in new store build costs, but the impact appears minimal at this point [66][68] Question: What are the underlying factors for the slowdown in consumer spending? - Management attributed the slowdown to economic uncertainty and consumers eating at home more frequently, rather than issues specific to Chipotle [73][74] Question: How does the company plan to address digital sales performance? - Management acknowledged the need for improvement in digital sales and is working on removing friction points in the app to enhance customer experience [113][114] Question: What initiatives are in place to drive positive transaction comps? - Management highlighted the importance of operational efficiency, marketing initiatives, and digital enhancements to drive positive transaction growth in the second half of the year [134]