CHIPOTLE MEXICAN GRILL INC Q4 FY2024 earnings call

Key Points

• Scott Boatwright mentioned sadness over Southern California wildfires, relief efforts by Chipotle including providing burritos, free meals, donations. Discussed business update with strong sales, comps, AUVs, margin growth, restaurant openings. Outlined strategies: throughput improvement, technology amplification (produce slicers, new equipment rollout), marketing strategy, people leadership with internal promotions, and international expansion.
• Adam Rymer discussed Q4 sales details, comp factors, cost of sales breakdown, labor costs, G&A details, stock buybacks, and tax rate information.

For fiscal year 2024, sales grew about 15% to reach $11.3 billion, driven by a 7.4% comp including over 5% transaction growth. Digital sales of $3.9 billion represented 35% of sales. AUVs increased to $3.2 million. Restaurant-level margin was 26.7%, an increase of 50 basis points year-over-year. Fourth quarter sales grew over 13% to $2.8 billion, with comp sales growing 5.4% driven by 4% transaction growth. Restaurant-level margin was 24.8%, a decline of 60 basis points year-over-year.

Forward-Looking Statements

• Anticipates annual comps in the low- to mid-single-digit range for 2025. Notes rolling off about 90 basis points of pricing in April, Easter falling back in Q2 negatively impacting Q2 comps. Mentions tariffs on imported items could have a 60 basis point impact on cost of sales, with offset expected in second half of 2025.

Risks

• Impact of wildfires on business operations. Potential impact of tariffs on imported items from Mexico, Canada, and China on cost of sales. Consumer price sensitivity and competitive pressure on value.

Q: Just a quick housekeeping and then a question about the food line. So just on the housekeeping, you talked about positive transactions in 2025, so I think you mentioned 90 basis points of price rolling off. If you don't take any additional price, what does that look like for the full year? I think you would still have some. And then the question about food costs is better than we expected, given all the headwinds you highlighted in terms of inflation and portion investments. I guess to the extent that it was better than you thought, what was the impact? Was it the pricing? Was it benefits from supply chain earlier than you expected? And have you contemplated tariffs as you think about it going forward?

A: Thanks, Sara. So on your first question, we believe pricing will be somewhere around 2% in 2025, and so that assumes no additional price. Because if you think about it, we just took about 2% in December. That will carry through December of this year. And then we roll off the roughly 1% national impact from the Fast Act pricing in April. So that comes to be around 2% for the full year. And then on your second question, you're right. We came in a little bit better than we guided in Q4 on cost of sales, and that was mostly because the step-up in avocado prices was a little bit less than we anticipated. It's still happening. It just is more of a timing issue.

Q: My question is on the comps guidance for the year. I think, Adam, you mentioned a few issues related to the first half. I was just hoping that maybe you could elaborate on how you're thinking the comp trajectory could play out as the year goes on. And I have a follow-up.

A: Thanks, David. I'll start talking about really January. So if you look at January from a transactions comp standpoint, we ran about a negative 2, and that included a pretty sizable impact from weather as well as the calendar shift, which kind of had, people going back to work and to school a little bit later with the New Year's Day falling in the middle of the week, and then a very small impact from the wildfires in L.A. All of that was about a 400 basis point impact on our comps in January. And so the underlying trend there is closer to about a plus 2. And so if you push that plus 2 forward for the rest of Q1, we believe that Q1 will come somewhere around flattish on comps. And the reason for that is really when you're looking at February, we're going to be comping over a really successful braised beef barbacoa campaign that we did last year. And that one, the amazing thing about that is we really saw a nice uplift not only in transactions but also in mix that caused a really nice lift in check, a lot of that sustained. And so we don't believe it will hit quite the same way this year because of how much of it sustained. So that's going to be a bit of a tougher comp as well as the second iteration of Chicken Al Pastor hitting in March. It was really pent up demand from the first time that it was in restaurants. And so when that going up as much as it did, that's going to be a really tough, tough comp going into March. And then Easter is also kind of a delay. And so Easter, being a few weeks later is going to cause a little bit of a loss in sales in the sense of Easter tends to really spring our burrito season or beginning of kind of that spring step-ups that we see. So the fact that that's happening several weeks later makes us believe that all of those things will lead to kind of a flat transaction comp in the first quarter. And then when you go into the second quarter, really strong comps from the year before. So I think that'll be kind of a low point for us in terms of the comparison for the full year. And then we'll step up in Q3 and Q4 from there to get to that low to mid-single digit guide that we have for the full year.