Earnings call transcript Q4 2022

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Operator

Good day and welcome to the Chipotle Mexican Grill Fourth Quarter 2022 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Cindy Olsen, Head of Investor Relations and Strategy. ahead. go Please

Cindy Olsen

on welcome call. and our fourth fiscal be quarter press ir.chipotle.com. website Hello, now, to you earnings found may it By If to Investor should XXXX Relations release. at everyone, not, our our have earnings access

in presentation by those statements. the constitute this our results our cause of forward-looking current from XX-K are report statements. risk on our discussion factors the will statements. may made begin forward-looking in projected forward-looking statements on business actual projections Please and results contained materially management's expectations, Form differ actual you and annual a These could that reminding see I future XX-Qs and and to certain for in business that and vary our risks these in Form from about results our market financial based

include discussions Relations measures via be found GAAP today measures. page Our the to included presentation will A website. reconciliation can of the our within link non-GAAP the financial on section Investor

We with which Chief Chief prepared and Brian Chairman Jack Niccol, and your Officer; Executive and call start take questions. will Administrative Officer; Financial today's we remarks after from will Hartung,

is team leadership the executive during entire Our session. Q&A available

will call turn with And I that, over to the Brian.

Brian Niccol

tremendous These inflationary and afternoon, highest good value. our daily, convenience, demonstrate periods AUVs results Chipotle's in on made and teams, fresh another and everyone. XXXX, results and delicious Cindy, the our year talented record Thanks, uncertain of expanding one resiliency facing restaurant-level delivered We of customization, environment. macro of food strong driven margin by an course, despite

growth represented XX.X%, of X% new last reach of XXX year, we Adjusted XXX restaurants, grew basis an comp. points including EPS representing sales. $X.X and Restaurant-level For Digital billion driven XX% was XX% sales $XX.XX, by was to the diluted year-over-year. over Chipotlanes. XXX opened increase margin an XX% sales year,

Turning to the fourth quarter.

that were impacted results loyalty headwind including quarter, from unique garlic are a factors accounting. a overall to from growth, a lower-than-expected by with few our While and our benefit the pleased were we steak guajillo

For the Restaurant-level XX% Digital year-over-year. increase over opened sales by restaurants, driven $X.XX, was represent a basis sales. representing of year, of XX%, sales was to year. last XX% billion XXX sales we grew an Adjusted diluted new quarter, and X.X% continue XX% grew margin In-store XX comp. including to by growth last XXX $X.X Chipotlanes. XX% EPS over points

Our transaction transaction further underlying brisket, trends that improved pleased positive. our and have throughout to trends lapped trends turning we with XXXX, entering quarter report the as I'm improved

we high comps quarter, anticipate range. the first in single-digit the For

getting further to back running this Our focus restaurants we beginning great on to emphasize plan and off, to and XXXX. the in basics pay is

strategies Additionally, create continue key future. we to help while will build five that upon the today we win to will us our

our at number technology each diverse on and access at sustaining five, running to food relevant four, integrity with by update an exceptional talent provide successful which two, the visible, drive number centers; making every strategies, people new me engagement; convenience improve number and while let provides guest developing include: great people-accountable by a to restaurants Now restaurant in-restaurant accelerating one, with brand three, these expanding digital productivity loved and leadership of experiences; and and restaurants culture level; innovation amplifying overall and world-class number support openings. and growth number and retaining delivering that

restaurants. with our Beginning

including exceptional Chipotle standards, in-restaurant the business is last restaurant on and delivering execution. with great treasure and call, an that a experience, we discussed is and culinary the guest it we critical As high

workarounds. a COVID to the and create need that resulted there outages, During were challenges pandemic, challenges, unforeseen staffing as from supply in such exclusions

time prepped make-line; frontline customer of are is ensuring on that and on the all aspect areas. periods food the lay Project drive accuracy properly reestablishing improving eliminating hospitality. culture every of teams helped throughput, time, of cooked continuing while in This deployed including in of delicious One we peak and are and One and on training throughput that build course, to with operational been each standards excellence to ingredients workarounds means have during stock, our Square staffed that that we digital has to delivering in We the are a improving the and foundations, these and our our are exceptional Project Square fully business. on

training. shoulder-to-shoulder We bringing are also back more

that thing tool from the pandemic not that only the I training One learned is is virtual has believe needed. everyone

levels our happy restaurants continue by our of of sooner two improvement more So past doing. This, onboarding new to confidence combined also process. to they XX% crew we for This experienced our the learning Shoulder-to-shoulder best to with as restaurants see is teams. crew with of are training. helps turnover leads in an staffing years our December improve on-the-job bringing fully being are And reducing better hourly to new experienced by with the essential virtual in training one an I'm months and salary to rates. training for managers members accelerate our stability, gives staffed. and amount into members turnover more both and

emerging When you this signs Project for with across training past the the operation. two One quarters, combine Square are positive

In and and and promoted of promote XX will our share we promotions. targeted and numbers that have XXXX, over hourly ahead. growth over to and And positions. we our people, to expand all We roles, management great have our surpassing it, by open X% restaurants XXXX, are roles XX,XXX tremendous year. excellence great of XX% XX% people GMs internal XXX leadership as over speaking collaboration proud And were of we opportunity to to achieve I'm grow to And these X,XXX focused restaurant field people, performance. new culinary on in drives operational restaurants, continue great the intensity manager we range per to XXXX, will over have

the employer choice. of to As is be we said the in goal past, have our

innovation. look improve gate the and excited to In are improvements we on with continue technology share advancement overall addition an to industry-leading to our a for to I'm ways along way couple is There functionality. experience app one update to invest opportunities, We new know initiatives of stage and benefits career will that teams. for continue to in competitive to our wages,

a to are which significantly. currently faster much overall grill improve execution, process curve testing steak. is we new cooking has learning the chicken grill consistent First, our for The and lowers the and

chicken it high and it maintains standards cook through Importantly, look our to process. our we to steak and further believe forward gate can We perfection. stage the culinary validating

our our first frontline, thrilled test restaurant more to which remember meals platform year. quarter, make-line a accurate in-restaurant may could and second throughput. expect this guests our Next of together in the digital learn And and share announced one investments digital we Hyphen on Hyphen further center is to promise service in automated I'm are Cultivate improving it our Cultivate to This automates on Fund. the the for digital on the orders half in first second, on-time, assembly help we with first we in would that the guests. Hyphen, we to prototype, on, will as focus that food teams our developing our you and deliver our of that our allow make-line fulfill of have

Last $X started and the ways we're experience functionality. advanced digital we guests. to enhance business, and constantly Speaking to sales, location-based revenue over improve in our it of looking our for quarter, represents technology our is of for our app testing billion XX%

process scan experience enhance program For utilize their Chipotle The speed, and who the can wrong app reduction real-time guests points in customers Chipotle location location very in, scan including their to code the to and and an more. to for rewards the quickly our the allowing encouraging, restaurants upon going results QR improvement them data messaging, from the with in stage pickup without for throughput. readiness impacting at users gate delivery rewards with experience our opt in engage wrong were arrival to reminders Rewards to guests, detection, a an improvement checkout order

we last it nationwide a month. out rolled As result,

more Moving more relevant making brand on more to loved. our visible, and

athletes their nutrition as real and for who all Chipotle focus by we Real partner them proper Real with real best of Our been has through fans a and Athletes food helping on levels platform ingredients. perform success providing of Food are

quarter, with Pulisic up to featuring Men's and athletes' go-to the U.S. McKennie in journey Soccer National tournament stars, showcase During Christian to Team the orders teamed app. their Weston we our soccer's while fourth biggest international

context also rival largest media leverage first million some to and social relevant into Gen new the our surpassed which we We the on we especially consumers, continue the media with of year, Z. the platform, to to put were brand to launch social followers, world BeReal. in brands TikTok remain X This

Shifting to menu innovation.

future. has Pastor while is one to delighted rolled last execute the sales. to Chicken out mentioned new still I'm to we flavor Al a transactions ready been simple that XXXX quarter, As exciting to menu two This validated item consist in near that providing of drives and be share new LTOs. and will operationally

a of launched great habits our lineup healthy contemporary We Macros Gen range such also a Balanced recently wide habits and that great to taste Lifestyle show great ingredients and our with feel they Bowl our way customers our and Freedom meals eating. millennials. Lifestyle spans High The Bowls lineup create to Bowls Bowl, existing Z wellness that made that Protein Grain Bowl. they new of of can cater are that a our balanced as

XX.X to XXXX, our rewards In million. Turning to we our program. by XX% Rewards members increased

rewards continues forward. get free program targeted sophisticated badging offers introduced member we promotions who XX XXXX, with going and offers more to rewards were throughout year. the rewards To members gamified and transactions. drive are them relevant of In our our Freepotle, program Our enroll personalized, increase serve content, help engagement understand better and and members, we personalized to as this XX% each drive plan we new which recently to

strategic done as new Chipotlanes. shortages job while such and development headwinds delays is access, successfully XXX expand and opening material team in pillar XXXX, fifth XXX to of including has and an inspection restaurants our navigating permitting Our outstanding

company. we fact, XXX for fourth which In quarter, new record a in the opened the was restaurants

drive-through Chipotlane access performance strong. quarter continues to unique of as we We be also convenience Chipotlanes our and opened during the the and our through expanded XXXth digital format,

In in restaurants by new to new to in we restaurant XXX fact, our productivity XXX began XXXX has basis over improved opening since Chipotles including open XX% X,XXX with We Chipotlane. points. XXXX, the plan about

and to Canada measured expansion local practices team team a a while in with restaurant Canada, continue out local works consistent a leadership plans, will best in our ensure to new Within our needs. U.S. closely adapting XXXX growth Europe. pace at to culture, built that we field have restaurants In open accelerate strong we and

will are entered we since We the and new XXXX, add for to which ten be market. growth in Canadian the plan restaurants rate now development growth around ready accelerated fastest

add to to a the We way. also additional remain the access. process capabilities challenging opportunity, a rolling Europe encouraged our also locations We by remain the backdrop. in few the are in we plan update we optimistic out will of despite expand XXXX, continue the progress performance and and stage-gate about Europe's In further along on macroeconomic UK, digital growth to we

for thank teams In center restaurant closing, another support I want terrific year. our to and

on focus starting Our is to getting the off. pay to back basics

and teams the excited further quarters. to over energized, Our are I'm coming see progress

long meeting our a AUVs double than Chipotle, with runway on that the right expand we believe remain have growth We ahead the million and grow restaurant we focused strategy and Chipotle. standards more excellence to team beyond in margins. make and place, of I $X count, have the will ability

that, I turn over And to will with it Jack.

Jack Hartung

XX% program. Sales loyalty in due grew year-over-year comp to decreased our that point everyone. good fourth included XX higher In the for Thanks, we grew about points to basis breakage expire. to we reach each an which afternoon, as our estimated member sales $X.X related the engagement. quarter headwind year, reevaluate will Brian. X.X%, QX billion And estimate of this year, loyalty And

of about XXX points year. basis to margin Restaurant-level last increased compared XX%

our impacted program $X.XX, performance The level unusual loyalty growth. restructuring. to previously quarter a unusual pay was representing related corporate in higher legal our addition to XXXX margin had items year-over-year share per expectations. Earnings sick and claims of In disclosed and by XX% was compared headwind, expenses modification expenses, medical share to the quarter fourth for restaurant-level adjusted

guest for sales mentioned, comps Brian great our digits. low a outlook to January Turning remain the trends experience. on turn positive double XXXX, as in we've seen the as were we transaction focused delivering

quarter, well we the comp comparisons seen high in QX, in through quarter-to-date remainder move For tougher of momentum sales as as be we've the range. as single-digit the to we anticipate factoring

middle for comps forecast increases the recession, lap of considering to difficult year, the it's uncertainty, to While QX. moderate the early expect rest including we of of in possibility as and the comps menu economic QX we price

beginning items, XXX quarter increases the of last now about the a of lower offset menu salsa. basis to cost expect through price sales key XX.X%, items, from In of beans, line benefit points in I'll of the and go with prices range across cost including avocado notably in to elevated queso, oil. of costs tortillas, year. P&L The decrease and most sales. Cost rice and across sales spices in several the prices salsa, we dairy, due board, be high-XX% QX, were our higher

the Labor addition pay last of decrease XX.X%, inflation costs of and was from year. sick about offset higher-than-expected to were basis claims. quarter The medical wage somewhat a leverage for benefit by XX sales in points

resetting range, start seasonally of employee we the QX, the to improve slightly, but as at elevated expect our wage due employee mid-XX% year an to in to For level taxes labor cost remain caps. due higher taxes

a from expenses by decline by XX decrease year. in expenses, natural delivery lower about across to repairs. higher decrease due gas This operating as costs XX.X%, offset costs of sales leverage, well last was quarter for and and driven were points several sales as maintenance delivery Other partially basis the a including

costs mid-X% in range were In year. last and we costs be the full come promo basis the points QX, for below marketing with the X.X%, to year in Marketing XX expect to around X%. quarter

QX, costs other be expected in range. the are low In to XX% operating

$XXX to on XXXX $X quarter expenses, the to the $X a $XXX was to million related a and a million million performance-based million disclosed million expenses. included includes accruals. $X $X related million in underlying performance-based basis bonus or G&A for previously $XXX levels million shares non-GAAP G&A excluding payout stock and our basis, also modification performance stock G&A, was of reduction related GAAP noncash compensation, reduction on legal to in in $XX the which estimated offset in million awards by transformation our

around ongoing QX, the slightly be this as We to XXXX to performance and QX. make G&A down be $XXX we underlying thereafter although in which move in people could will support issued our growth. in up or expect and comp grow technology anticipate $XX amount million and stock subject continue investments our QX million based on grants, We in around to is to are

in shares million around total that the bringing February, expect to associated in during also our taxes million related our $X around conference $XXX We employer vest recognize leader quarter to anticipated QX for G&A $X costs with and with associated field to million.

full was $XX of it Depreciation more sales. And XXXX, to for or quarter year slightly the the we inch restaurants. expect quarter X.X% open for each million up as we

GAAP it discrete And Our was to effective XX% items. for XX.X% we on range, underlying for be XXXX, though tax vary rate our QX will tax rate may non-GAAP. in for based to XX.X% effective the for continue XX% and estimate

Our cash billion a with balance ended sheet revolver. the strong $X.X no along remains quarter restricted with million as untapped with debt, cash, and in we investments $XXX

year. total XXXX, of which was we million a repurchased largest $X,XXX. of ever level stock increased we our stock and repurchased of average market million quarter, price $XXX opportunistically quarter share our amount single our repurchase During overall, the the the fourth when the $XXX repurchases a price at fell We during stock. And our an with continue we'll of in repurchased in to

the quarter, authorized additional $XXX million During quarter, the the to end we Board authorization million program remaining. our and share our of had at $XXX an

the remain had Chipotlane. which in new restaurants XXX on with record XX% new XX a fourth XXXX XXX a opened open Chipotlane. restaurants a to including least And We at in we XXX quarter, to of track

permitting a raw remain and including and inspection challenges, labor and headwind, construction, shortages. material installations, Development delays, delays component utility

into the range end challenges high X% openings the expect we XX% pipeline While these subside. to XXXX, strong, to our toward remains we these headwinds of move and persist once to expect

the off conclude, in great a To from guests. focus early to on basics our getting start we're to strong of our with of progress running and treasuring restaurants XXXX signs back

to we strengthen While each we work play will visit. will and earn cannot and out the to every continue customer predict XX how months, next the macroeconomic over our hard operations environment

for I to hard commitment teams restaurant year their and teams their and work restaurant Chipotle. want support all this to our our thank for

to we're take that, questions. With happy your

Operator

Thank you.

We will ahead. the [Operator begin from be the now go will David from session. Instructions] Baird. question first And Tarantino question-and-answer Please

David Tarantino

a good trends. of afternoon. couple on about have your traffic Hi, I questions Hi. commentary

that Brian, trends if correctly. traffic think mentioned turned I you I positive that underlying have heard

you and I'm word puts the adjustments meant with the had Omicron I perhaps what this a by know year, favorable respect wondering some comparison So to making if underlying last against January some we that. takes And had then of and you're to year. weather lot

linking for of internal factors it wondering, wondering some your maybe adjusting control. how I'm your initiatives. towards So I'm of that of like And traffic some the the outside progress were you're seems some you're

Brian Niccol

Yes.

means anything So, first of transactions. there. There all, underlying just wasn't

So, that thanks then we the the exited in for for and turned And continue positive, we January. basically, build quarter, saw as our transactions is what saw asking clarity. we to

then You it's at our Omicron are some some what is staffing were seen right, weather. good also best there been. we've But the was is there and

turnover is been two basics, teams years. open combination the traffic in we're the And menu deactivations, think the progress at throughout of a make-line Our keeping correctly, that from the is both why seeing and frontline also in no key digital driver on whole month. deployed our meaning focusing best in it's close, lines to the January I open,

it's and closer like even that good are feeling from. how We But burrito where about we're our shaped January to forward closer walking So better we a believe we're exited as up. December can of infamous we like we position how we great we strength operationally. we get still and get season. And

David Tarantino

if there. what on other and wondering are I'm you could on through year target transactions maybe that maybe one the ultimate those you I on goals And for what be work if And how than progress those think towards operations, elaborate should focused Great. progressing? you as metrics could or the ask just you're follow-up the maybe your

Brian Niccol

Yes. Sure.

deactivate a supply of this, lot color a years, our during had the one menu the deactivations on in to teams suppliers, partners we've on So reestablished chips or both little that's whether teams that items, course of couple I'd like fallback created business. of distribution we've we certain Obviously, anything our of those and put challenges, of the chain digital workarounds kind last anymore. was clock And right, allowing with and our so our lines. position just or it's a not to

is David? hear know. don't expectation me, – Can The you I

David Tarantino

Thank I can. you.

Brian Niccol

should is those you expectation close and with open you in prepared be The then Okay. be from stock, should to items.

So that there times into were of how hundreds we the that's quarter points where during back had on deactivations, single and and digits now going. menu we're

So that's metric. a key

Another ten on-time That's nearly be would metric key percentage. our points. digital by improved

is seen that's I so where anticipate and ingredients movement And staffed a then big of towards correctly. you correctly, order correctly the on when kind we've us as I think so progress obviously, in really we then the more the peak see saw the frontline. into you on And why deployed of of need to get And hiring second some being function that's and build performance, we'll on on quarter, focus our well throughput order additional more having again people. throughput many

the seen. always we the correctly, lot deployed like restaurant, get traffic beyond of basics stability, running to they outcomes. is we the focused it know good teams your and on correctly, there are then you are So just trained more keep hey, of good got a if I that start with, we very trends indicators we've

David Tarantino

you Thank much. Great. very

Operator

go And Senatore of from next Sara Bank question is America. from Please ahead. the

Sara Senatore

I have you. a on units. on then follow-up the one labor quick staffing a new and and Hi, thank

inflation, reconcile? the guess, piece, the think had saying me been think you mid-single-digit on menu. on something price I So could wage and you just you’ve XX% I like I labor help

labor – So it were think higher to those talking you the hour staff lot was? forward to of I if trying drop training? investments. what is should the year XX% from be sort is look the staffed, were late than more coming hours as about we about just that Or shoulder-to-shoulder that fully a there like XX%

Brian Niccol

restaurants referring often Yes. what Well, wage of we’re absolute we’ve at-model. been that keep think and on that are inflation just we been. is – more And than what with fortunately, stores, not referring an being that’s subsequent I closing The at-model then to, where the XX% what metric. we’re track that of we’re paying to has our

virtual just doing need restaurants an I process. team training to And of our was crews. shoulder-to-shoulder where in shoulder-to-shoulder the our also element meaning general training field at our directors leaders, maybe our some regard be to In that’s part think we’re new shoulder-to-shoulder too getting training, and the point on our with training, the managers versus there reliant

training. to any there’s I that. additional you add So that having more But to shoulder-to-shoulder cost labor not if don’t should with in result Jack, want know anything

Jack Hartung

best No. Sara. for we No, you put in think to I training, position. we right, And incremental is, in have don’t the think investment labor training the need teams that’s because your

watching You have along somebody self-correct that’s you somebody to what that’s and have to the kind way. do chosen them of

se. So labor per it extra be shouldn’t

hire we line But I P&L going to be people, when it’s that the blow training. to Now think going be all. you’ll don’t some up forward labor will see additional anything the at on there’s going XX,XXX

Sara Senatore

Okay.

for line kind I improvement So, on restaurant-level still margin we’re about just saying thinking there’s think, what labor, is you’re the just new room, comp? the as of the

Jack Hartung

Definitely. Yes.

Sara Senatore

you is then so that sort there it’s quickly productivity. is better? where on else higher just and the of there, basis volumes you. And of Or different clarify Could new at Is the on models? the productivity store board, store going better? than because Thank non-Chipotlanes, just that it’s X,XXX across points comparing Okay. sort new open the something Chipotlanes

Jack Hartung

I’ll Sara, Yes. this. take

the last all longer the over a moved look so, years to really got we’ve productivity. it’s you Because based the opening, our four think at over period of on you Chipotlanes. if time I up to more or look look

of our up around XX% on example, for doing. today, So average existing stores our restaurants are open what comp

so. range of the four we three in back look XX% kind were or or If high years ago, you years

thing three a our a happened and we’ve been Chipotlanes majority to biggest having the today from three to of having there’s Chipotlane. is moved the change. ago half years, is years step a the portfolio from just So handful that’s And of

And we to continue we when at compared XX% a the to – what outperform still Chipotlanes non-Chipotlane that without Chipotlane, are XX% they our cohort. look doing,

our the find digital the think driver we that So, main with and drive-through. customers that Chipotlane is convenience the

Sara Senatore

so much. you Thank

Operator

be next Palmer will David The question from go ISI. Evercore from ahead. Please

David Palmer

I been Thanks. digital question the of orders. wanted by to decline a I’ve ask somewhat surprised about there. level

I in pickup. the quarter, we that think that was how you. store traffic to per your traffic do about you in I That’s are digital also correct, store quarter. Maybe per mid-teens. stabilize think that Thanks. digital much for estimated just what decline things think back the can third where including and you declined in both delivery that on you but thoughts it’s to fourth can there And it? are And channel? outlook you line? the know important relatedly, your What’s comment

Brian Niccol

Go ahead, Jack.

Jack Hartung

is, Yes. get a it. driving One to that we’re Listen, things return in started, in-restaurant. a there’s having David. surge are of couple I’ll

higher some people think that and with out while is a of convenience, move from healthily think that channel adds very, the probably comes kind from delivery And a normal a price XX%, are or there’s so Delivery that and part away we’ve moving is pandemic. in the And two growing declining since again I our last But of there fourth that. quarter away about. transactions half as deciding I years been business very people been secondly, that’s who throughout has a declined the just that of well. getting and year lot

two the main are those So drivers.

figured this of in we would that digital And settle range. high XX% kind

XX% so range now. And at we’re

And our markets affected, Southeast be the it’s towards starting we in to and least range. were were XX% So Southwest. we the they the within on that pandemic, were high range they saw that the the thought that in. two would When that’d early we be normalizing normalize,

the range it So us. right for about like feels

David Palmer

throughput view the to So start do down? going it front digital get on belief second stabilize comparisons your the to to orders things your make-line? comes you about benefit you’re that perhaps dual going of then when enjoy you’re is enjoy that you’re there? to to benefits and quarter, start some to the going that with that – that channel, is Or lap talking you’re Is of really on think and step kind a

Brian Niccol

as right, think David. And reset I business, we now business shown such, about our started trajectory. right we’ve tremendous where makes is, feel acceleration. to way our sense Yes. show it I delivery the the then has it think, like That’s mean to order-ahead business the be we in-store obviously, And has economically.

you So, I think said it well.

David Palmer

you. Thank

Operator

The from is next from Charles question Cowen. Please go Andrew ahead.

Andrew Charles

I Jack, that was Labor have noise of tease expected impact curious factor? you. from questions lot what some within obviously And in of but us missed Thanks. There’s there’s is for a have terms external guidance impact two you’re help of XQ. Great. I margin claims factors cost term, that external in higher labor. labor XQ the for in then what XQ. And I’m sick that the just betting the mid-XX% margins. out you Can

restaurant-level the has in of to getting fast $X my have quarter that to obviously And margins out what’s you what question and ago a forward that said sales then we structure volumes, might your sales target? XX% relative the level achieving to zoom when you’re and get been real rapidly if confidence is up you towards and million the if right

Jack Hartung

Yes.

So the with quarter. fourth let me start

basis an Frankly, point the year-over-year loyalty entry the in the in comp rather you pieces we XX down when be XX%, for change just part XX% book that was there it more our was of related of that XX% journal to were got And breakage. the at breakage. than range how the to Our we to would look expectations had margin range. the that

expected. the just saw we XX the breakage was that the this higher-than-expected That’s pay was points – it as look margin. especially we points fourth quarter sick December. bit typically do we and – that we to during medical well. more and us year, a not things you would points quarter the at basis basis in on up in surge on of basis was We pick reduced additional to than If little see It cost expect there claims had But or the – XX that reflect recur. something XX those

well. And softened then during sales December as

I that sales. basis like there and with retail We was and went the hand-in-hand a that. know that points, in was or so. points basis softer XX think seasonal holidays some And shift weather XX things

it So, those definitely back. We time, XXX we in think normalize, basis get but as much potential so margin we have back fourth we get that to we the if we that points quarter. do And as at one is think there don’t or look all things that. the can at

just will in So a price-adjusted that XX% we – that $X high on then that the more the of as know that a current we million, range you’re basis, normalized over XX% menu from and with [ph] that at our confident that up XX%. flow-through towards model on mind, we still us looking XX are provides if $X.X move volumes million basis get to that

Andrew Charles

the there And can guys I in through talked sorry, you in think was guys you than were you But expected just clarify earlier bit improvement – about script, you quarter. a I’m how softer sales December. said the

that expecting? that that guys you the just was really were perform reflection level December a to didn’t So

Jack Hartung

we started I driving we that that quarter, as GGS, out was expected, way we a rate Yes. October it attachment there transactions. would describe and mean, the an about I doing wasn’t comp, in talked was that listen, while that soft the were mid-single-digit

picked the as middle up comparing in soft brisket. we stopped quarter. That out November. started of the in against was we We So,

lapped it, XXXX. for high menu a had, So then we single-digit pricing we while. December comps increase the from call of And

pop, we December. normally in as then momentum got that just we holiday, And just around – see so that we that the see didn’t

is, frankly, we soft. describe would ended soft started I the and we way the it the quarter quarter So

and got is, Now January, on comparison we trend just – the happy our through transaction, month-over-month, a did just as improve. about got really that’s what we’re a into holidays but the holidays from where we standpoint not

we a fourth feel was But go And tough about quarter so from we here. yes, good quarter us. listen, the for where

Andrew Charles

color the for Thanks Jack.

Operator

be Brian Please & will go question Co. from from Oppenheimer Next ahead. Bittner

Brian Bittner

for question. you. Thank the Thanks

them off? replacing more you year type more lap would plan you same-store sales do you fully to and XXXX throughout move you factor lower for year some here some sit to increases, And normalized, Or about menu today, anticipate as do with the you be these albeit the model? these price the XXXX As pricing total large price Jack, lot for as let a increases? you increases probably progresses, of the of roll what think full

Jack Hartung

Yes.

mean with I’ll start we I about So, and expectations. that can talk then

in of a in of X% zero adjustments couple And end as off and rolls basically there target somewhere kind being as running it I end because QX. to I’m We’re sorry, that by pricing. And QX now year, the mid-QX. early in of in there running get mentioned, adjustments, were early time range. in well. XX% that mid-single-digit the We’ll of right then delivery we’re kind you to up then – And in the

So overall for that the in will year, be it somewhere of kind mid-single-digit.

do thing In inflation, is terms just hope to not to a increase over we're year. going going is inflation and a we're going we're to action, price want pricing The going take last that main tame. we're cover to lap of to

of ingredients. now, some on there our few know the about. keep we is is Beef a that Right one that hearing pressure we

demand. we'll but seen supply greater there's be be yet, more But haven't going to predicting We about inflation But going and that see carefully does. it's what do that, it just a cover take to action inflation watch comp ingredients we and I versus but of pricing inflation to that to and everyone need some a price take cover lap. wouldn't and we increase to – wages, is

Brian Bittner

it just And flipping a I guidance January. traffic just same-store positive clarification think separately we quarter. range you here build the talked sales the how that in you've in that and traffic the lot about be But if of sense. makes a thought? first for for land quarter, know out single-digit That mix do would on in first if what high kind you hypothetically played

Jack Hartung

it right I mean, positive traffic. mid-single-digit running, now, we're Yes. call

a in but probably components. kind move that that quarter, something a predict, little be expect away is mix also the be X% as we think Pricing Omicron. that more range for We to the be in X-ish positive it's those will harder the main range going X-ish, of like mentioned. are that. transactions to We XX% there's low then that guidance from component. assumes Mix we're to that I And percent be maybe low-single-digit going to

Brian Bittner

Great. Thank you.

Operator

ahead. from the And you. Thank be go next question Jon Please Citigroup. from Tower will

Jon Tower

question. the for Thanks clarification on Quick taking the Great. question.

little store know a this productivity, the On talked new on I we bit earlier.

was where the clarification. been timing kind about that's don't have – little I of And the on During the based related lower anything timing the bit if or there normal. can a stores calculate know than of quarter, it the else. That's we something that to way looks productivity might the like

it that you question your expectations. hasn't The then to Guajillo I might on could what about it missed. curious versus you long, how been but if perform and your us know have happened? that think expectations know a you didn't to up dissect to live reason Curious it as Garlic why thinking that give is didn't and Steak, the

Brian Niccol

on and chime I'll the the can store in I then answer let on one productivity, Jack the... first

Jack Hartung

Yes.

We the nail opened a very, the record very back-loaded. but during You it on quarter, hit head. the XXX was restaurants

great a and think openings the scratching, they half had restaurants a Our that December I the opening We of more last everything could did teams the as just had than of get of month the we the to or job clawing probably month in in And open. year. of well. record doing

didn't yes, you're considering So a see opened we – typical sales you flow-through, XXX restaurants. not

Jon Tower

you. Thank

Brian Niccol

we rolling that's we'll we of we've one make was we and it why get it's question And learn And than that things one items But are where from Guajillo environment date. a we of we over forward rolled challenge Steak. the out. our going but to analyze that then continue arguably as transactions. And it process also Look, always which of on learning. tested result, those about it to think use brisket, best-performing the sure a it the your got check done didn't stage-gate that when we Garlic had we different very the in benefit, I menu we so

Operator

Zackfia will Sharon next be And from ahead. question our you. Thank from William Blair. Please go

Sharon Zackfia

where high less season, you is throughput I to as kind we of mean, now that and or frontline throughput versus because the Is here staffing wanted question of I we seeing. kind much much And how if how have tenure a about there frontline lower a table enter afternoon. how frontline you XXXX? compare Good to opportunity as opportunity on more the staff? Hi. were contrast about the – turnover the it lagging way dimensionalize of kind and ask productive is in is think XXXX you're experienced really on

Brian Niccol

question we for saw on teams we Yes. and occurring our is what because think and Look, present and I in which an important that's perform one, we when thanks this with the training, what this forward. shoulder-to-shoulder what we for at know leadership our model is is going correctly restaurants XXXX, that's have anticipate deployed

teams those in, how know where upside nice dropped. doing. levels there's we So XXXX-time-period. in our And get capable throughput of are to one much is thing back obviously, the have it, turnover call were numbers we're to they our throughput targeting is that's The

more means they're So we're which getting teams, getting reps. more stability in the

And higher-volume have to what that we higher-level being today, walk we deployed trained, we we're months, more stay working correctly those people more on and ensure that's they've together reps the then how we we together. do is how throughput. get deployed sure and into get do them as or do that them So how teams these get got correctly, we focused make that

Jack Hartung

at XXXX, to timing there's factors just two Yes. add, back And look Sharon, turnover. and One the we here. to when is position

very promotion when were is going example XXXX. to rates kitchen be in where turnover people are in but we're slows their one position well, the to down, on manager, other longer. In we your close as The for

so. was So it tenure about role in the Today, meaning it's X.XX. manager like average like the X.XX, kitchen or was eight months

months like So that. X.X maybe seven, it's like something

not we're we're and distance striking were back ahead again. but year apprentice, where we to a in of quite ago, XXXX, In we're

So we high-turnover tenure be back – like areas our so. of those the period up. going stabilizing numbers average to was turnover appear are with year-and-a-half seeing were those moving year the But or and during just that the that down last

Operator

John JP Please Thank with next you. Morgan. And Ivankoe will ahead. be the from question go

John Ivankoe

in automation the I know you. Thank perhaps on make practices ways. that of more demand could the and also been technology or efficient in some labor working you store potentially different Hi. reduce and consistent a you've number for

we How able market might few So actually benefit, a on I take of talk you to kind you of be just could even the have. different limited just a it's and some if when and hoping or was some are along about they Thank to at – basis minutes seconds level? a few see far you that a packages start you

Brian Niccol

Sure. Yes.

goes closest that and is It as that my grill time lot in which now I speak. we've And from faster, in faster. just one test test multi-store every new earlier for significantly a them perfect to the work actually So just steak. frankly probably mentioned chicken, allows that we on, that's we're moving our the thing tool the remarks. And cook gives one-store going a teams the got to same a a

we're a Cultivate those in next quarter, And early Hyphen. in the quarter. one with probably Obviously, about working into on excited we'll that one. we're which our of this real an get end live center So automated partnership prototype in digital is make-line, first the of

bit further a out. So little that one's

And pilot one a And that our arm live is much in with call then arm more we Chippy, as got so rolling or just live we which that what I the the, on – have goes information automated chips. to robotic fry restaurant. on

the happen say that's great. with and all easier, chicken and one restaurant. can are times practice grill, promising you the really and when because then out make-line our the these taste in I'd things steak good giving what the our cook grilling us and chicken in the steak make we've feedback seen are and culinary, digital of that So People probably reduce But close digital – that's ones probably significantly is automated probably furthest one is the make-line.

members culinary, feedback new we're more are so that us the grills, team consistent with and Our everybody giving great wins. using love they

John Ivankoe

you. Thank

Operator

go ahead. next will Dennis from be Geiger The UBS. question from Please

Dennis Geiger

you. Thank

– really Just first wondering would pricing. it And the if possible one the traffic give price then pricing mix be about the XQ? question to another on for is

that, of on that's view spoke shaping how tougher the thought pricing guys. that value customer that into And any low-income you how Thanks quarter, believe related anything kind shaped as seen the levels, resistance performs it you the last for of how kind the you update you've to business pricing potentially scores, about year. your if on any relates about to to macro? a to curious talked customer you Just

Brian Niccol

Yes. Sure.

Obviously, you with things. back that we look, do for as back to a and I of think down, couple So experience to the people delivery out that seen premium resistance especially of really about. experience. have it is relates in-store any are combined function a One, pricing, meaningful the and in-store have occasion, channel pay our was our that's to not but a

customization So coming getting it potentially, convenience, see on the control of in they the terms. of and kind the restaurant their

great on. consumer, earns the see the the the often. think We people through customization, continue happened and to chasing our we not continues winning pricing is, value have know and coming great we acted not we're individual the was go That's made We're speed/convenience, over that with same And terrific what what do. And the the I decision that would that that's not with resonate. to off we gain regardless brand culinary, $XXX,XXX, to frankly, discounts. higher-income better of going thing low-income to more what consumer

Our be really value scores continue to strong.

to are say fast-casual that If would still discount. we're at you are look XX% comparable the I category, at XX% in that people

come that of a made So think where to look, good that stronger really we lot seeing and to deal seeing, stronger And February. here I had of out we're I move in think with in we're moves with. challenges January kind think I a result, work the as we've we've teams. to bear And are operations,

know don't that. to So add anything if to there's Jack, I

Jack Hartung

No.

components – And the was you mix down perfectly, of about X%. down for said in looking about Brian. were just XX.X%. X%, Transactions think quarter. our that I pricing think components about the I The was you were

And that to you the gets points. XX with underlying an that comp about journal entry that we So and X.X%. was basis deals had then breakage,

you the X.X% that to comp. gets So

Dennis Geiger

guys. you Thank Great.

Operator

Bernstein next Please Barclays. ahead. question from our with Jeffrey And is go

Jeffrey Bernstein

Great, thank much. very you

that in XX% is in know restaurant that question about XXXX, on headwinds just in I fourth some the below ended margin. year you maybe range, for the that First expectation. full talked you quarter brought though

any as forward, about specific I know pressures. key you specific environment on color full of think end today going some to you XXXX. you of if the kind rolling the gave thoughts year to but your by the year quarter, the you off wondering, you based know Just give first and the perhaps pricing as look can what cost

to more of when And reasonable just to you it’s XX% whether year mentioned the plus XXXX, kind getting hit wondering $X the you’re on on of specifically the like XXXX. just but the assume or I thinking return wondering interim your XX% thoughts in know to or full XXXX beyond. you what million,

Jack Hartung

be we to don’t will I haven’t Yes, economy. to is mean, but hard decisions tame. any made quarter, action inflation on going don’t, come right we And the think reasonably true. it’s on so what’s and not that pricing reason beyond some that Hopefully We the know color first will the now. we we gave, happen

the out. So the think is let I it about play year kind way Jeff, we’re would to going of

we’ve up to wages the We’re going we sure make gear managing burrito terms got managing people recruit pay everything in to, we can to supply that, chain, do of we for as season.

plans take We’ll element watch out. to inflation pricing have we the And right action. how now plays any don’t

coming then ahead. could more kept at pricing it’s, we might So were doesn’t we we even pitch. we inflation more see we take It feel year fever year. last see be, like than more and and ahead at action, that patient this The us,

being whether basis, could can into when or range I up patient that XX% ability things more So kind grow XXXX, get of volumes, it’ll at from normalize, the is sustainable on do What margin tell see you these year have to this a later absolutely you that’s into year. then there. this us I think, we a and

promises any on quarter-by-quarter just basis. I make don’t to a want

I what’s several so because to going that is the have – happen, predict intact. happened last our hard in it’s many has to but do know and quarters, model things Just happened

Jeffrey Bernstein

of just couple And following bigger up a Understood. on I’m picture topics.

it’s pace. to mentioned economy about Western I’m point Anything at, the wondering you. that growth’s I are or you great. going measured other be measured a headwinds, think timing in for around causes the might is perhaps, why would concern. I to your international maybe reason that think, there and primary Brian, of you said acceleration when the that if Thank the be Europe international be

Brian Niccol

Yes, sure.

So think obviously look, really Chipotle. from to we’ve in continue on absolute experiences When which a sure We’re probably line really the well. opened because And Canada more that we to performing. much economics percentage opening; most those really we’ve Canada exciting. been ever people its is perform and full restaurants pricing steam is the right? at ever standpoint I top Europe, frankly, there want make have look with ahead, And patient the you standpoint

very the there’s inflation But on we’re dealing look, a still is feedback opened most with news of like we the in really good positive, what the performing well. we’re recent lot So, we’ve is that on positive. that seeing; is the restaurants are Feedback Europe. experience culinary very really and

our last any it just way. unfortunately, in been we’re the not time taking because with three So, years normal have

on So getting the of false we we any positives part negatives just or sure false any business. aren’t make

the that they people good a But can like and the we’ve our how they they and signs the we like States convenience patient in look, early with culinary and very are like be, burritos United and is expansion. our like news the approach growth So we tremendous bowls speed. runway got international the

road. a that’s down So a opportunity of for lot recipe the

Operator

question Danilo ahead. with from the And next you. Gargiulo Please Thank Bernstein. go is

Danilo Gargiulo

Great, thank you.

the as from in traffic XXXX. on primarily any or could moving particular, I are operational operational as to So expectations seeing productivity XXXX? seeing demand wondering your improvements and improvement are the the expecting moving along if productivity in we offsetting possibly along side whether in be correctly, are consumers I’m improvement you you and standing and trends seems you’re that understand also from be But

Brian Niccol

up. consumer the frequency looks at right has use higher kind we if look, purchase to experience demand, be of income look No, now you especially as their there. our gone actually in-store the Especially consumer,

do be. better court Scott great got, great And that’s people, So, and press, frankly continue we we quarter. see performance the full part that things of our why and the this those standards, we’ve the we’ve operate, have two will culinary. better against we’ll on, operating make believe first team progress gains we’ll the If on we fundamentally a in our believe throughput we hopefully, that to continue to experienced

Danilo Gargiulo

And you. that like where if mentioned there and are Thank also on Square that from Project can elaborate signs proud I I one One. was emerging some are of maybe positive of. you’re couple wondering you share think you particularly a metrics,

Brian Niccol

seen Yes, obviously mentioned is a things the of lot look one we’ve deactivations. many less earlier I this of incidents that

when want products chips, have order order a are steak. we the decreased. guac, And conversion to all if you is down. available you So you dramatically that’s deal because chicken, you online, online, available That big know don’t goes go what your rate when

conversion back should be. seen we’ve have the it we rate stock, so when where in And gets products to our

think then a I way. meaningful And do in percentage, Project more and our correctly seen What they’re I that time a up. We’ve shows testament these when to already ready really throughput, also has year to that progress Square also we’ve of great on-time had rush and up we’ve I teams is we stability Scott’s got seen a huge getting our teams and impact got than the two so the we’ve deploying step albeit also on-time small some at less think the also more years, but focused to one. over think is shoulder-to-shoulder, on news movement, with in on in have teams turnover, more in with go trained model than of

Operator

Harbour Stanley. our And ahead. final you. today from Brian go will Thank Morgan Please be question from

Brian Harbour

question Yes, customers Maybe data you see that into you coming little are thank in seen those stores to to think your fallen a decline basically delivery, order-ahead, have those a the mobile bit? you’ve customers that shifted just off able as do business you. or on first have or

Brian Niccol

ahead. That’s Obviously is we’ve people order the compare, result, seen in trends and white of two obvious the What execution one difference then definitely and choose when between you shift it our probably a where that between where order as make we’ve toggle us ordering versus ahead. the we’ve is restaurant an one especially can ordering looks operate you I what’s quickly the then pickup. premium they label think some like biggest seen like been places to And in seen. those people that’s shift delivery they a to

We part in the for of a So be is customers. to committed a the freebie. borrowing proposition sure where provide because people of yes, free Chipotle. renting there else we value we’ve we the we that the look, take Chipotle they food not somewhere customers them, want the seen people those something’s, buy to which at But culinary right business delivery, provided. idea I’m convenience advantage stay into, interested of that or are and might we’re they at the speed for if provide, getting

us So been well choice, to the think serve run. in I and going long a that’s conscious it’s

Brian Harbour

mean, like catalyst that kind Is Okay. can that? think do the or and next in of but guess, there And you that? it to of Freepotle also drives behavior? I I And of of else that, kind some any a then step as customer how sounds it’ll you want that up couple of it question view rolled go that grow the is you’ve mobile out, you ordering affect a you, think into a kind you for of you stabilize, maybe on kind years you launched do this the do seen in margin perks January. be impact just of frequency related new your that

Brian Niccol

in doing things. it’s program. the two Yes, One, loyalty hopefully it’s look engaged people more keeping

more on rewards into in month then one what, only the people also it. program. We’re And acquiring

one looks in. And of so it do. part was only And what doing But exactly it’s really question? month it it’s promising your your we’ve again, what want to second that

Brian Harbour

next kind that, the, if for order of more driving think penetration. greater, Just catalyst you the that’s

Brian Niccol

is digital through definitely rewards the know come to in And we when Yes, out are more get our our people when most frequency program, purchase look, them. program. engaged our what business engaged people comes rewards we of it

is of I combination via the doing where rewards more do experience more personalization think of that road. comes result here, program. amount a rewards out specifically impact So we’re with see frequency that the down digital customers from the in the of around And will high engagement of, you usually, the

Brian Harbour

you. Thank

Operator

back this like Ladies to would turn our concludes Niccol closing the and I gentlemen, session. remarks. question-and-answer for to conference over Brian any

Brian Niccol

strategies to the again, another we we’ve and XXXX were Obviously, of of part optimistic a number the unexpected where people. was where had openings with call. record able operational thanks loved for about brand and we to other lot of culinary basics execute to great quarter. the engaged once is focus store stay executing on and combined all focused one of culinary do against we’re see purpose Okay, today everybody thanks. with on the power demonstrated Integrity continue these years we And resiliency of of the the in to those margins. a I visible, and going make you’re AUVs the being expand execution, business food because more We great provide. to things with. our Chipotle while the that a occurred. the continue and our fourth us think And, And questions of But combined the with hopefully Again, our great convenience

we’re So and growth going about off to a good XXXX our optimistic start in runway forward.

So soon, Bye. care. I’m talk being part call a you to Take thanks sure. and of everybody the we’ll for

Operator

The for presentation. conference you Thank attending has today’s now concluded.

now may You disconnect.

Chipotle Mexican Grill (CMG) 7 Feb 232022 Q4 Earnings call transcript