The fast-casual restaurant company located in the United States pleasantly surprised shareholders by increasing revenue and earnings by more than double digits.
Unsurprisingly, the stock rose 14% the very next day after the report. Nonetheless, it is down 13.6% year to date as investors are concerned about how the company would manage the business in the face of rising inflation. Let’s look at its most recent quarterly results to see how it’s dealing with increased costs and if the stock has the potential to rise.
CMG’s sales were $2.2 billion in the second quarter, which concluded on June 30. This was a 17% increase over the same quarter for the previous year. A number of causes contributed to the growth. Year over year, in-restaurant revenues climbed by 36%. Remember that this time last year, people were hesitant to leave their homes and ordered from eateries. Chipotle’s in-restaurant revenues have increased as the economic rebound has gathered traction. Meanwhile, digital sales remained strong, accounting for 39% of total sales.
Comparable restaurant sales increased by 10.1%, excluding the impact of new openings and closings. This increased the average revenue per restaurant to $2.75 million. This figure has grown for four straight quarters, owing to CMGâ€™s successful transition from pandemic lockdowns. Management set a long-term objective of $3 million in average revenues per location.
CMG anticipates this trend to continue, expecting revenue growth in the mid- to high-single digits for the upcoming quarter, including menu pricing hikes in August. Customers appear to be responding quite favourably to the company’s previous round of price hikes. When a company raises its prices, people often buy less of the goods. It’s possible that the pent-up demand for restaurant meals balances the negative impact of increasing costs.
CMG had to contend with rising pricing for the ingredients it needed to provide consumers. Food, beverage and packaging expenditures grew to $673.9 million in the June quarter, up from $574.5 million the previous year. Similarly, labor expenses climbed from $464.5 million to $549.9 million. The Coronavirus pandemic has disrupted supply systems worldwide, resulting in historic inflation levels when paired with robust consumer demand.
CMGâ€™s operational profit margin grew to 15.3%, up from 13% in the same period last year. The positives of economic revitalization, with people returning to eateries, have outweighed CMG’s growing prices.
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