NEWPORT BEACH, Calif-- Chipotle Mexican Grill, Inc. (NYSE: CMG) today reported financial results for its fourth quarter and fiscal year ended December 31, 2023.
Fourth quarter highlights, year over year:
Total revenue increased 15.4% to $2.5 billion
Comparable restaurant sales increased 8.4%
Operating margin was 14.4%, an increase from 13.6%
Restaurant level operating margin was 25.4%1, an increase of 140 basis points
Diluted earnings per share was $10.21, a 27.3% increase from $8.02. Adjusted diluted earnings per share, which excluded a $0.15 after-tax impact from expenses related to accelerated depreciation, partially offset by a reduction in contingencies related to certain legal proceedings, was $10.361, a 25.0% increase from $8.29.1
Opened 121 new restaurants with 110 locations including a Chipotlane
Full year 2023 highlights, year over year:
Total revenue increased 14.3% to $9.9 billion
Comparable restaurant sales increased 7.9%
Operating margin was 15.8%, an increase from 13.4%
Restaurant level operating margin was 26.2%1, an increase of 230 basis points
Diluted earnings per share was $44.34, a 38.4% increase from $32.04. Adjusted diluted earnings per share, which excluded a $0.52 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs, accelerated depreciation and corporate restructuring, partially offset by a reduction in contingencies related to certain legal proceedings, was $44.861, a 36.9% increase from $32.78.1
Opened 271 new restaurants with 238 locations including a Chipotlane
'2023 was an outstanding year where we delivered strong transaction growth driven by throughput and menu innovation, opened a record number of new restaurants, surpassed $3 million in AUVs and formed our first international partnership,' said Brian Niccol, Chairman and CEO, Chipotle. 'I am more confident than ever that we have the right people and the right strategy to achieve our long-term growth goals of reaching 7,000 restaurants in North America, $4 million in AUVs, expanding our industry leading margins and returns and furthering our purpose of Cultivating a Better World globally.'
Results for the three months ended December 31, 2023:
Total revenue in the fourth quarter was $2.5 billion, an increase of 15.4% compared to the fourth quarter of 2022. The increase in total revenue was driven by an 8.4% increase in comparable restaurant sales attributable to higher transactions of 7.4% and an increase in average check of 1.0%, and to a lesser extent, new restaurant openings. Digital sales represented 36.1% of total food and beverage revenue.
We opened 121 new restaurants during the fourth quarter with 110 locations including a Chipotlane. These formats continue to perform well and are helping enhance guest access and convenience, as well as increase new restaurant sales, margins, and returns.
Food, beverage and packaging costs in the fourth quarter were 29.7% of total revenue, an increase of 40 basis points compared to the fourth quarter of 2022. Food costs increased due to a higher mix of beef as well as inflation across the menu, most notably higher costs for beef, produce, and queso. These increases were partially offset by the benefit of menu price increases and, to a lesser extent, lower paper costs.
Restaurant level operating margin in the fourth quarter was 25.4% compared to 24.0% in the fourth quarter of 2022. The improvement was primarily due to the benefit of sales leverage and, to a lesser extent, lower paper costs. These decreases were partially offset by higher inflation across several food costs and, to a lesser extent, wage inflation.
General and administrative expenses for the fourth quarter were $169.2 million on a GAAP basis, or $170.0 million1 on a non-GAAP basis, excluding a $0.8 million reduction in contingencies related to certain legal proceedings. GAAP and non-GAAP general and administrative expenses for the fourth quarter also include $122.0 million of underlying general and administrative expenses, $35.7 million of non-cash stock compensation, $10.1 million of higher bonus accruals and payroll taxes on equity vesting and exercises and $2.2 million of other costs, primarily related to our upcoming All Managers Conference scheduled for the first quarter of 2024.
The effective income tax rate for the fourth quarter was 26.2% compared to 26.3% in the fourth quarter of 2022. The slight decrease in the tax rate was primarily due to an increase in tax benefits from option exercises and equity vesting, partially offset by an increase in tax reserves and nondeductible expenses.
Net income for the fourth quarter was $282.1 million, or $10.21 per diluted share, compared to $223.7 million, or $8.02 per diluted share, in the fourth quarter of 2022. Excluding a $0.15 after-tax impact from expenses related to accelerated depreciation, partially offset by a reduction in contingencies related to certain legal proceedings, adjusted net income was $286.2 million1 and adjusted diluted earnings per share was $10.361.
During the fourth quarter, our Board of Directors approved the investment of up to an additional $200 million, exclusive of commissions, to repurchase shares of our common stock, subject to market conditions. Including this repurchase authorization, $424.1 million was available as of December 31, 2023. The repurchase authorization may be modified, suspended, or discontinued at any time. We repurchased $144.3 million of stock at an average price per share of $1,935.80 during the fourth quarter.
Results for the full year ended December 31, 2023:
Total revenue for 2023 was $9.9 billion, an increase of 14.3% compared to 2022. The increase in total revenue was driven by a 7.9% increase in comparable restaurant sales attributable to higher transactions of 5.0% and an increase in average check of 2.9% and, to a lesser extent, new restaurant openings. Digital sales represented 37.4% of total food and beverage revenue.
We opened 271 new restaurants during 2023, bringing the total restaurant count at year-end to 3,437. Of the 271 new restaurants opened during the year, 238 locations included a Chipotlane. We had a total of 811 Chipotlanes as of year-end, which includes conversions of existing restaurants.
Food, beverage and packaging costs for 2023 were 29.5% of total revenue, a decrease of 60 basis points compared to 2022. Food costs benefited from menu price increases and, to a lesser extent, lower avocado costs. These benefits were partially offset by inflation across several ingredient costs, most notably beef, tortillas, and queso.
Restaurant level operating margin for 2023 was 26.2% compared to 23.9% in 2022. The improvement was primarily due to the benefit of sales leverage and, to a lesser extent, lower avocado prices. These decreases were partially offset by higher inflation across several food costs and, to a lesser extent, wage inflation.
General and administrative expenses for 2023 were $633.6 million on a GAAP basis, or $629.6 million1 on a non-GAAP basis, excluding $4.8 million of corporate restructuring costs and a $0.8 million reduction in contingencies related to certain legal proceedings. GAAP and non-GAAP General and administrative expenses for full year 2023 also include $478.9 million of underlying general and administrative expenses, $118.5 million of non-cash stock compensation, $25.3 million of higher bonus accruals and payroll taxes on equity vesting and exercises and $6.9 million of other costs, primarily related to our upcoming All Managers Conference scheduled for the first quarter of 2024.
The effective income tax rate for 2023 was 24.2% compared to 23.9% in 2022. The increase in the tax rate was primarily due to fewer tax benefits related to option exercises and equity vesting.
Net income for 2023 was $1.23 billion, or $44.34 per diluted share, compared to net income of $899.1 million, or $32.04 per diluted share for 2022. Excluding a $0.52 after-tax impact from expenses related to restaurant and corporate level impairment and closure costs, accelerated depreciation, corporate restructuring, partially offset by a reduction in contingencies related to certain legal proceedings, adjusted net income for 2023 was $1.24 billion1 and adjusted diluted earnings per share was $44.861.
During 2023 we repurchased a total of $589.8 million of stock at an average price per share of $1,827.46.
More information will be available in our Annual Report on Form 10-K, which will be filed with the SEC in early February 2024.
Outlook
For 2024, management is anticipating the following:
Full year comparable restaurant sales growth in the mid-single digit range
285 to 315 new restaurant openings, which assumes developer, permit, inspection, and utility delays do not worsen
An estimated underlying effective full year tax rate between 25% and 27% before discrete items
Definitions
The following definitions apply to these terms as used throughout this release:
Comparable restaurant sales, or sales comps, and comparable restaurant transactions, represent the change in period-over-period total revenue or transactions for restaurants in operation for at least 13 full calendar months.
Average restaurant sales refer to the average trailing 12-month food and beverage revenue for restaurants in operation for at least 12 full calendar months.
Restaurant level operating margin represents total revenue less direct restaurant operating costs, expressed as a percent of total revenue.
Digital sales represent food and beverage revenue generated through the Chipotle website, Chipotle app or third-party delivery aggregators. Digital sales include revenue deferrals associated with Chipotle Rewards.
Conference Call Details
Chipotle will host a conference call on Tuesday, February 6, 2024, at 4:30 PM Eastern time to discuss fourth quarter and full year 2023 financial results, as well as provide a business update for the 2024 first quarter.
The conference call can be accessed live over the phone by dialing 1-888-317-6003, or for international callers by dialing 1-412-317-6061, and use code: 2191312. The call will be webcast live from the company's website on the investor relations page at ir.chipotle.com/events. An archived webcast will be available approximately one hour after the end of the call.
About Chipotle
Chipotle Mexican Grill, Inc. (NYSE: CMG) is cultivating a better world by serving responsibly sourced, classically-cooked, real food with wholesome ingredients without artificial colors, flavors or preservatives. Chipotle had over 3,400 restaurants as of December 31, 2023, in the United States, Canada, the United Kingdom, France and Germany and is the only restaurant company of its size that owns and operates all its restaurants in North America and Europe. Chipotle is ranked on the Fortune 500 and is recognized on Fortune's Most Admired Companies 2024 list and Time Magazine's Most Influential Companies. With over 115,000 employees passionate about providing a great guest experience, Chipotle is a longtime leader and innovator in the food industry. Chipotle is committed to making its food more accessible to everyone while continuing to be a brand with a demonstrated purpose as it leads the way in digital, technology and sustainable business practices. For more information or to place an order online, visit WWW.CHIPOTLE.COM.
Forward-Looking Statements
Certain statements in this press release and in the February 6, 2024, conference call are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements under 'Outlook' about our anticipated full year 2024 comparable restaurant sales growth, goals for number of new restaurant openings, and estimated underlying effective full year tax rate, as well as statements about first quarter 2024 business results to date, expected restaurants with Chipotlanes and rate of expansion, future labor costs, future general and administrative and other costs, future estimated tax rates and future long-term prospects. We use words such as 'anticipate', 'believe', 'could', 'should', 'may', 'approximately', 'estimate', 'expect', 'intend', 'project', 'target', 'goal' and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this press release are based on currently available operating, financial and competitive information available to us as of the date of this release and we assume no obligation to update these forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements, including but not limited to: increasing wage inflation and the competitive labor market, including as a result of regulations such as California AB 1228, which impacts our ability to attract and retain qualified employees and has resulted in occasional staffing shortages; the impact of any union organizing efforts and our responses to such efforts; increasing supply costs (including beef, tortillas, queso, salsa, beans and rice); risks of food safety incidents and food-borne illnesses; risks associated with our reliance on certain information technology systems and potential material failures or interruptions; privacy and cyber security risks, including risk of breaches, unauthorized access, theft, modification, destruction or ransom of guest or employee personal or confidential information stored on our network or the network of third party providers; the impact of competition, including from sources outside the restaurant industry; the financial impact of increasing our average hourly wages; the impact of federal, state or local government regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the costs and availability of suitable new restaurant sites, construction materials and contractors and the expected costs to accelerate our international expansion through franchise restaurants in the Middle East; increases in ingredient and other operating costs due to inflation, global conflicts, climate change, our Food with Integrity philosophy, tariffs or trade restrictions and supply shortages; the uncertainty of our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in guests' perceptions of our brand, including as a result of actual or rumored food safety concerns or other negative publicity, decreased consumer spending (including as a result of higher inflation, mass layoffs, fear of possible recession and higher energy prices), or the inability to increase menu prices or realize the benefits of menu price increases; risks associated with our digital business, including risks arising from our reliance on third party delivery services; risks relating to litigation, including possible governmental actions and potential class action litigation related to food safety incidents, cybersecurity incidents, employment or privacy laws, advertising claims or other matters; and other risk factors described from time to time in our SEC reports, including our annual report on Form 10-K and quarterly reports on Form 10-Q, all of which are available on the investor relations page of our website at ir.Chipotle.com.
1 Restaurant level operating margin, adjusted diluted earnings per share, adjusted net income, non-GAAP general and administrative expenses, adjusted depreciation and amortization, and non-GAAP effective income tax rate are non-GAAP financial measures. Reconciliations to GAAP measures and further information are set forth in the table at the end of this press release.
CHIPOTLE MEXICAN GRILL, INC.
CONSOLIDATED STATEMENTS OF INCOME: See full results at:
https://newsroom.chipotle.com/2024-02-06-CHIPOTLE-ANNOUNCES-FOURTH-QUARTER-AND-FULL-YEAR-2023-RESULTS
SOURCE Chipotle Mexican Grill, Inc.
For further information: PR Contact: Laurie Schalow (949) 524-4035, MediaRelations@chipotle.com; IR Contact: Cindy Olsen, CFA (949) 524-4205, Cindy.Olsen@chipotle.com
CHIPOTLE MEXICAN GRILL, INC. 
