CHIPOTLE MEXICAN GRILL $403.00 (New York symbol CMG; TSINetwork Rating: Speculative) (303-595-4000; www.chipotle.com; Shares outstanding: 30.9 million; Market cap: $12.6 billion; No dividends paid) is a Denver- based Mexican restaurant chain. It charges slightly higher prices than fast food companies, but it offers better quality food, including naturally raised meat, and superior decor and service.
In the three months ended June 30, 2013, Chipotle’s sales rose 18.2%, to $816.8 million from $690.9 million a year earlier. The company’s restaurants attracted more customers during the quarter, which pushed up same-restaurant sales by 5.5%. Moreover, Chipotle opened 44 new outlets and now has 1,502 locations. For all of 2013, it plans to open 165 to 180 restaurants. Earnings rose 7.6%, to $87.9 million, or $2.84 a share, from $81.7 million, or $2.68.
The company’s earnings would have been even higher, but it spent 33.1% of its sales on food and ingredients in the latest quarter, up from 32.1% a year ago. Prices rose particularly sharply for chicken, dairy products and salsa ingredients.
Chipotle operates in the fickle and extremely competitive U.S. restaurant market. The shares are 8.9% below their April 2012 high of $442.40, but they still trade at nearly 40 times the company’s forecast 2013 earnings of $10.21 a share. That’s a high ratio that leaves the stock vulnerable if the company runs into any short-term problems.
Still, Chipotle is a well-established chain with a growing following, especially among healthconscious, environmentally aware consumers.
