Chipotle still has work to do to restore growth: Ells
Feb. 8, 2018
by Monica Watrous
Executives of Chipotle Mexican Grill Inc. expect fewer transactions at the burrito chain through July.
DENVER — Executives of Chipotle Mexican Grill Inc. expect fewer transactions at the burrito chain through July. This news sent shares of the Denver-based company on the New York Stock Exchange plummeting by as much as 11 percent from the previous day’s close of $304.33, following the earnings release on Feb. 6. Weak traffic in the latest quarter showed “there is still work to be done to restore strong growth and consumer trust,” said M. Steven Ells, chairman and CEO.
Net income in the year ended Dec. 31, 2017, was $176,253,000, equal to $6.19 per share on the common stock, up sharply from $22,938,000, or $.078, in the prior year. Revenue totaled $4,476,412,000, up 15 percent from $3,904,384,000.
In the fourth quarter, the company earned $43,793,000, or $1.56 per share, an increase over $15,975,000, or $0.55, on revenue of $1,110,100,000, up 7 percent from $1,034,560,000.
Steve Ells, founder of Chipotle, is set to step down from his role as CEO once a successor is named.
Comparable restaurant sales increased 6.4 percent for the year and 0.9 percent for the quarter. The increases were driven by higher menu prices, which were partially offset by a decrease in transactions.
“The past couple of years have presented a set of challenges, but I know that the changes we have made are the right ones to help us move toward achieving our full potential,” Ells said during a Feb. 6 earnings call. “We will continue to focus on our long-term success, and we’ll continue to fight to preserve things that make Chipotle special.”
Ells, who founded Chipotle Mexican Grill in 1993, is set to step down from his role as CEO and will become executive chairman once a successor is named. A search for his replacement is underway.
Chipotle continues to struggle to recover from a foodborne illness outbreak in 2015.
“We firmly believe that a new CEO with a passion for driving excellence across every aspect of our business will be another important step in our growth, and I’m optimistic as we look forward to the next 25 years,” Ells said.
The company continues to struggle to recover from a foodborne illness outbreak in 2015 that included 55 cases of E. coli O26 across 11 states followed by a norovirus outbreak at a Boston-based restaurant that reportedly sickened 80 individuals.
Chipotle’s turnaround efforts have been met with tepid response. Introductions of chorizo and queso, operational improvements and a new loyalty program, among other initiatives, have not been enough to restore customer traffic at the chain to pre-food safety crisis levels.
In 2018, Chipotle management plans to open 130 to 150 new restaurants.
For 2018, management expects comparable restaurant sales in the low single digits and plans to open 130 to 150 new restaurants, a decline from the projected 195 to 210 new openings in 2017.
“Despite a challenging year, we feel that we have a lot of momentum and energy throughout the company heading into 2018,” said John R. Hartung, CFO. “We’re more committed than ever to continue to perfect our dining experience and to build our sales. The investments that we’re making in our people and to growing our digital and catering business and investing in new innovation will not only help set up the foundation for a successful 2018 but also for the next 25 years.”