Chipotle Mexican Grill Q4 revenue $1.1 billion, compan extended benefits to employees
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Revenue for the quarter was $1.1 billion, an increase of 7.3% from the fourth quarter of 2016. The increase in revenue was driven by new restaurant openings and to a lesser extent by a 0.9% increase in comparable restaurant sales.
Comparable restaurants sales include a 0.6% reduction related to deferred revenue that was recognized during the fourth quarter of 2016 related to company's Chiptopia Summer Rewards program.
Comparable restaurant sales increased as a result of an increase in the average check, including a 2.4% impact from menu price increases taken in select restaurants during the second and fourth quarters of 2017, partially offset by a decrease in transactions.
Chipotle Mexican Grill opened 38 new restaurants during the quarter, and relocated or closed four restaurants, bringing the total restaurant count to 2,408.
Food costs were 34.2% of revenue, a decrease of 110 basis points compared to the fourth quarter of 2016. The decrease was driven by the benefit of the menu price increases, cost savings initiatives related to paper and packaging products, and relief in avocado prices during the fourth quarter of 2017 compared to the fourth quarter of 2016.
Restaurant level operating margin was 14.9% in the quarter, an improvement from 13.5% in the fourth quarter of 2016. The improvement was driven primarily by decreased promotional activity and lower food, beverage and packaging costs as a percent of revenue.
General and administrative expenses were 5.2% of revenue for the fourth quarter of 2017, a decrease of 110 basis points over the fourth quarter of 2016. In dollar terms, general and administrative expenses decreased compared to the fourth quarter of 2016 due to decreased non-cash stock-based compensation expense and lower legal costs.
Net income for the fourth quarter of 2017 was $43.8 million, or $1.55 per diluted share, compared to net income of $16.0 million, or $0.55 per diluted share, in the fourth quarter of 2016.
Net income for the fourth quarter of 2017 included a $6.0 million benefit ($0.21 per diluted share) for changes in U.S. tax law.
Full year 2017 results
Revenue for the full year 2017 was $4.5 billion, up 14.7% from the prior year. The increase in revenue was driven by new restaurant openings and a 6.4% increase in comparable restaurant sales.
Comparable restaurant sales for the full year included a 1.2% benefit from menu price increases during the second and fourth quarters and a 0.3% benefit from the accounting for deferred revenue during 2016 and 2017 related to Chiptopia Summer Rewards.
Comparable restaurant sales improved primarily as a result of an increase in average check during 2017 compared to 2016.
Chipotle Mexican Grill opened 183 new restaurants during the year and closed or relocated 25 (including the closure of 15 ShopHouse Southeast Asian Kitchen restaurants), bringing the total restaurant count to 2,408.
Food costs were 34.3% of revenue, a decrease of 70 basis points as compared to the prior year.
The decrease was driven by the benefit of the menu price increases taken in select restaurants during the second and fourth quarters of 2017, combined with bringing the preparation of lettuce and bell peppers back into company's restaurants after using pre-cut produce during portions of 2016, and cost savings initiatives related to paper and packaging products. These decreases were partially offset by higher avocado prices.
Restaurant level operating margin was 16.9% for the full year 2017, an improvement from 12.8% in the prior year.
The improvement was driven by sales leverage, including the benefit of menu price increases, decreased marketing and promotional spend and labor efficiencies, partially offset by higher wages paid to crew and managers. Marketing and promotional expenses were 3.5% of revenue during 2017, compared to 5.1% of revenue during 2016.
General and administrative expenses were 6.6% of revenue for the full year of 2017, a decrease of 50 basis points over the prior year, primarily as a result of sales leverage.
In dollar terms, general and administrative costs increased compared to the prior year primarily due to recording a liability of $30.0 million, 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.
Additionally, increased bonus costs and higher non-cash stock-based compensation expense contributed to the increase. The increase was partially offset by lower legal costs, as well as decreased meeting costs because of the biennial All Managers Conference held in September 2016.
Company's 2017 effective tax rate was 36.1%, a decrease of 4.7% from 2016, due to the enactment of the Tax Cuts and Jobs Act, and a lower state tax rate. This decrease was partially offset by federal credits on overall higher pre-tax operating income.
The Tax Cuts and Jobs Act reduced the federal corporate income tax rate to 21% starting in 2018. As a result, Chipotle Mexican Grill recognized a $6.0 million benefit related to the remeasurement of company's deferred tax position at the lower rate.
Net income for the full year 2017 was $176.3 million, or $6.17 per diluted share, compared to net income of $22.9 million, or $0.77 per diluted share, for the prior year.
Chipotle Mexican Grill announced enhancements to benefits that will reach all of its 71,000 employees.
hese enhancements, which include special cash and stock bonuses and enhanced paid parental leave, are part of the company's ongoing commitment to advancing both the professional and personal lives of its employees.
Resulting from savings due to the Tax Cuts and Jobs Act, the new benefits have already begun rolling out to Chipotle employees.
Chipotle will reinvest more than one-third of its anticipated savings from tax law changes into its employees. The remainder of the reinvestment will be dedicated to improvement of restaurant facilities and operations.
New employee benefits include:
Accelerated Training Programs. More training programs for employees, including a formalized classroom program with a dedicated faculty that will focus on a range of topics related to operational excellence and leadership.
Cash & Stock Bonuses. Qualified hourly and salaried restaurant employees will receive a special one-time cash bonus of up to $1,000. Qualified staff employees will receive a one-time stock grant.
Maternity/Paternity Coverage. Additional paid parental leave coverage for everyone from hourly managers to salaried employees.
Life Insurance and Short-Term Disability. The company has added life insurance and short-term disability insurance coverage for hourly restaurant managers. ■