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8-K
CHIPOTLE MEXICAN GRILL INC filed this Form 8-K on 10/24/2017
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during the quarter, closed two restaurants, and relocated one restaurant, bringing the total restaurant count to 2,374.

Food costs were 35.0% of revenue, a decrease of 10 basis points as compared to the third quarter of 2016. The benefit of the menu price increases taken in select restaurants during the second quarter of 2017 and decreased paper cost and usage were offset by higher avocado and beef prices, as well as steak making up a higher portion of our product mix compared to the third quarter of 2016.

Restaurant level operating margin was 16.1% in the third quarter of 2017, an improvement from 14.1% in the third quarter of 2016. The improvement was driven primarily by decreased marketing and promotion expense and labor efficiencies.

General and administrative expenses were 8.8% of revenue for the third quarter of 2017, an increase of 120 basis points over the third quarter of 2016 primarily due to recording a liability of $30.0 million ($18.2 million after tax and $0.64 on basic and diluted earnings per share) during the third quarter of 2017, which represents an estimate of potential claims and assessments by payment card networks related to the data security incident that was announced in April 2017. This increase was partially offset by a decrease in meeting costs because of the biennial All Managers Conference that was held in September 2016.

Net income for the third quarter of 2017 was $19.6 million, or $0.69 per diluted share, compared to net income of $7.8 million, or $0.27 per diluted share in the third quarter of 2016.

Results for the nine months ended September 30, 2017

Revenue for the first nine months of 2017 was $3.37 billion, up 17.3% from the first nine months of 2016.  The increase in revenue was driven by new restaurant openings and an 8.3% increase in comparable restaurant sales,  including a 0.6% benefit from deferral of revenue from 2016 (which partially benefitted the first quarter of 2017) for outstanding rewards under the Chiptopia Summer Rewards program. Comparable restaurant sales improved primarily due to an increase in the number of paid transactions and an increase in average check due to fewer promotions during the first nine months of 2017. We opened 145 new restaurants during the first nine months of 2017, and closed or relocated 21 restaurants, including the closure of 15 ShopHouse restaurants, bringing the total restaurant count to 2,374.

Food costs were 34.3% of revenue, a decrease of 50 basis points as compared to the first nine months of 2016. Cost savings from bringing the preparation of lettuce and bell peppers back into our restaurants after using pre-cut produce during portions of 2016, reduced testing and waste costs, and the benefit of the menu price increase that went into effect in select restaurants during the second quarter of 2017 were partially offset by higher avocado prices.    

Restaurant level operating margin was 17.6% for the nine months ended September 30, 2017, an improvement from 12.5% in the first nine months of 2016.  The improvement was driven by decreased marketing and promotional expense, sales leverage, and labor efficiencies. Marketing and promotional expenses were 3.4% of revenue during the first nine months of 2017, compared to 5.2% of revenue during the first nine months of 2016.

General and administrative expenses were 7.1% of revenue for the first nine months of 2017, a decrease of 30 basis points compared to the first nine months of 2016, primarily due to sales leverage.  General and administrative expense increased in dollar terms for the nine months ended September 30, 2017, primarily due to recording the $30.0 million liability estimate related to the data security incident, as well as increased non-cash stock based compensation expense and increased bonus expense.  The increase was partially offset by lower meeting costs because of holding the biennial All Managers Conference in September 2016 and lower legal costs.  Stock compensation expense was higher during the first nine months of 2017 because the first nine months of 2016 included a reduction in expense for performance share awards that were no longer expected to vest against performance criteria.

Net income for the first nine months of 2017 was $132.5 million, or $4.62 per diluted share, compared to net income of $7.0 million, or $0.23 per diluted share, for the nine months ended September 30, 2016.



 


 

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