Chipotle Q4 'most challenging' period in company history
Feb. 3, 2016
by Erica Shaffer
Chipotle faces financial challenges and an expanded criminal investigation.
DENVER – The E. coli outbreak linked to Chipotle Mexican Grill restaurants may be over, but the financial fallout continues. Net income for fourth quarter ended Dec. 31 plunged 44 percent to $67.9 million, or $2.17 per diluted share, down from $121.2 million or $3.84 per diluted share in the comparable year-ago period.
Revenues retreated 6.8 percent to $997.5 million. Comparable restaurant sales fell 14.6 percent. Restaurant level operating margin dropped 700 basis points to 19.6 percent in the quarter on significant declines in comparable restaurant sales and non-recurring costs related to the company’s foodborne illness problems. However, favorable food costs partially offset those declines.
|Steve Ells, founder, chairman and co-CEO of Chipotle
“The fourth quarter of 2015 was the most challenging period in Chipotle’s history, but the Centers for Disease Control and Prevention has now concluded its investigation into the recent E. coli incidents associated with Chipotle,” Steve Ells, founder, chairman and co-CEO, said in an earnings release. “We are pleased to have this behind us and can place our full energies to implementing our enhanced food safety plan that will establish Chipotle as an industry leader in food safety.”
The outbreak may be behind Chipotle, but the US Attorney’s office for the Central District of California has broadened its criminal investigation into the company. Chipotle said a new subpoena issued on Jan. 28 requires the company to produce documents and information related to company-wide food safety dating back to Jan. 1, 2013. A subpoena served in December was limited to a single Chipotle restaurant in Simi Valley, California.
|Monty Moran, co-CEO of Chipotle
Monty Moran, co-CEO of Chipotle, said 2016 will be a very difficult year for the company. But he said Chipotle is in a position to “aggressively welcome customers into our restaurant and restore customer confidence in the things that make Chipotle great.”
Full year results for 2015 include net income of $475.6 million, or $15.10 per diluted share, compared to $445.4 million, or $14.13 per diluted share a year ago. Full-year revenues climbed 9.6 percent to $4.5 billion on sales from new restaurants not yet in the comparable base. The company opened 229 new restaurants in 2015 bringing the total to 2,010.
Restaurant level operating margin declined 110 basis points to 26.1 percent for the full year. The company attributed the decrease to higher labor and other operating costs, partially offset by lower food costs.