NEWPORT BEACH, CALIF. — Hiring enough workers and finding a steady supply of ingredients proved difficult for Chipotle Mexican Grill in the fiscal year ended Dec. 31, 2022, but both issues eased late in the year.
“I’m also happy to see an improvement in turnover with December being one of our best months in the past two years for both hourly and salary turnover rates, and our staffing levels continue to improve with 90% of our restaurants fully staffed,” said Brian R. Nicol, chief executive officer, in a Feb. 7 earnings call to discuss fiscal-year results. “This, combined with better stability, leads to more experienced teams.”
Turnover in the kitchen manager position is close to where it was in 2019 before the pandemic, said John R. Hartung, chief financial officer.
“So, the average tenure in the kitchen manager role was like 0.69 (in 2019), meaning it was about eight months or so,” Hartung said. “Today, it’s like 0.64. So, it’s like maybe 7, 7.5 months, something like that.”
Supply chain challenges caused some Chipotle restaurants to not offer certain items, like guacamole or chips, at different times of the 2022 fiscal year.
“One of the things that we’ve seen is a lot less incidents of menu deactivations,” Nicol said. “So, when you go to order online, all of the products are available: chips, guac, chicken, steak.”
Chipotle had net income of $899 million, or $32.28 per share on the common stock, in the fiscal year, which was up 38% from $653 million, or $23.21 per share, in the previous fiscal year. Revenue increased 14% to $8.63 billion from $7.55 billion. Comparable restaurant sales increased 8%. In-restaurant sales increased 26%. Digital sales accounted for 39% of food and beverage revenue.
Operating margin was 13.4%, which marked an increase from 10.7% in the previous year. The improvement primarily was due to the benefit of sales leverage and lower delivery fees associated with a lower volume. Higher food costs and wage inflation partially offset those factors.
Chipotle in the fiscal year opened 236 new restaurants, including 202 locations with a Chipotlane, the company’s digital order drive thru pick-up lane.
In the fourth quarter, net income of $224 million, or $8.08 per share on the common stock, was up 68% from $133 million, or $4.75 per share, in the previous year’s fourth quarter. Revenue increased 11% to $2.18 billion from $1.96 billion. Chipotle opened 100 new restaurants in the fourth quarter, a company record.
Chipotle’s stock on the New York Stock Exchange closed at $1,688.48 per share on Feb. 7. The restaurant chain gave fiscal-year results after the Feb. 7 close. On Feb. 8, the stock price fell 2.7% to close at $1,643.00 per share. Chipotle earnings and revenue in the fourth quarter were weaker than expected, according to media reports.
“Turning to the fourth quarter, while we are pleased with our overall growth, our results were impacted by a few factors that were unique to the quarter, including a lower-than-expected benefit from garlic guajillo steak and a headwind from loyalty accounting,” Nicol said, adding delivery transactions declined 15% in the quarter.
In the first quarter of 2023, Chipotle executives anticipate comparable restaurant sales growth in the high-single digit percentages.
Chipotle should introduce an al pastor menu item soon, Nicol said.
“This new menu item is operationally simple to execute while still providing a new exciting flavor that drives transactions and sales,” he said.