Chipotle Mexican Grill Inc. (CMG) operates a major restaurant chain serving fast-casual Mexican food, including burritos, tacos, bowls, and similar dishes. The company operated 2,666 domestic locations and 40 international locations as of September 30, 2020. Chipotle's primary competitors include both fast food chains such as Taco Bell and other brands affiliated with Yum! Brands Inc. (YUM), as well as fast-casual restaurants such as Qdoba Mexican Eats and other restaurants in close proximity to Chipotle locations.

Key Takeaways

  • Chipotle Mexican Grill operates a chain of more than 2,650 fast-casual Mexican restaurants.
  • The chain's stores are located primarily in the U.S., with a small number of international locations, including a stake in an entity operating four pizza restaurants.
  • COVID-19 has adversely impacted the company's business.
  • Digital sales are growing quickly and accounted for 48.8% of total revenue in Q3 2020.
  • Chipotle has reintroduced the Carne Asada premium steak option to its menu for a limited time.

Chipotle's Financials

The economic impact of the COVID-19 pandemic and related social-distancing measures had an adverse impact on Chipotle's business during Q3 2020, which ended September 30, 2020. Net income for the quarter was $80.2 million, falling 18.6% compared to the same three-month period a year ago. However, revenue growth for the quarter rebounded after falling 4.8% year over year (YOY) in Q2 2020. Revenue rose 14.1% to $1.6 billion in Q3 2020. Net income was negatively affected by a 16.0% increase in operating expenses compared to the year-ago quarter.

Chipotle indicated that it had to temporarily close some of its restaurants in response to the pandemic. While the majority of its restaurants have been reopened, about 10 of them were still closed as of September 30, 2020. Most of these are located within malls and shopping centers. The company expects to continue experiencing adverse impacts to its business from the pandemic for the foreseeable future.

Prior to the outbreak of COVID-19, Chipotle had been growing rapidly. Revenue rose 24.8% from its 2017 fiscal year (FY) to FY 2019. Net income rose 98.3% during FY 2019. That growth marks a sharp financial and operational turnaround after sales and profits plunged in 2016 and 2017 due to customer illnesses caused by E. coli bacteria at Chipotle restaurants in as many as 12 states.

Chipotle's Business Segments

Chipotle operates as a single segment and divides its operations across eight regions. Chipotle does not report individual financial figures for its eight regions. But the company has been extending its reach through several measures.

Chipotle's digital sales through delivery and customer pickup have surged in recent years. Advertising campaigns, new delivery partnerships with Uber, and other measures have helped increase awareness about the company's digital offerings. However, the acceleration of digital sales growth to 202.5% in Q3 2020 has been aided by the impacts of the pandemic. Digital sales accounted for 48.8% of total sales in the quarter, compared to just 18.0% in 2019 and 7.1% in 2018. 

Chipotle also is expanding its store footprint in the U.S. and abroad. The company added 44 locations in Q3 2020. Of these newly-opened restaurants, 26 included a drive-through format that the company calls "Chipotlane". Three locations were closed. For Chipotle's already-established restaurants, comparable restaurant sales rose 8.3% in Q3 2020 compared to the same quarter a year ago.

Chipotle's Recent Developments

Chipotle recently announced that it was bringing back its Carne Asada to restaurants for a limited time. The premium steak option was first added to the company's menu in late 2019 and was available until early 2020. It was the fastest-selling new protein launch in the company's history and was up to four times as popular as its previous limited-time protein offering. Chipotle also recently launched a group-ordering feature on its Chipotle app.

How Chipotle Reports Diversity & Inclusiveness

As part of our effort to improve the awareness of the importance of diversity in companies, we offer investors a glimpse into the transparency of Chipotle and its commitment to diversity, inclusiveness, and social responsibility. We examined the data Chipotle releases. It shows Chipotle does not disclose any data about the diversity of its board of directors, C-Suite, general management, and employees overall. It also shows Chipotle does not reveal the diversity of itself by race, gender, ability, veteran status, or LGBTQ+ identity.