Chipotle (NYSE: CMG) announced its results for the first quarter of fiscal 2022 after markets closed on Wednesday, April 26. The fast-casual restaurant chain saw healthy revenue growth as consumers returned to dining out.
This follows shutdowns during the pandemic when Chipotle had to rely almost entirely on delivery and pickup orders. Interestingly, despite the return of in-person dining, digital sales remain robust. Let’s take a closer look at quarterly results.
Revenue growth continues for Chipotle
In the first quarter, which ended March 31, total revenue increased 16% to $2 billion. This equates to seven consecutive quarters of double-digit revenue growth. The return of people to restaurants has fueled this growth over the past quarter. In fact, restaurant sales increased by 33% compared to the same quarter of the previous year.
The figure was particularly impressive given that the omicron variant caused an increase in coronavirus cases in the first two months of 2022. “Chipotle’s performance in the first quarter was strong, despite the challenges of the Omicron variant and the inflation continues,” said Brian Niccol, President and CEO. CEO of Chipotle.
For the second quarter, management expects the momentum to continue and expects same-store sales growth of around 11% (excluding the impact of new store openings and closings).
The menu price increases that the company has gradually introduced in recent quarters are also contributing to revenue growth. Like many other businesses, Chipotle is facing rising costs on everything from labor to paper to beef. To counter some of these increases in input costs, the restaurant chain has raised menu prices. The good news for shareholders is that consumers are still choosing Chipotle despite the increases.
The strong results gave management confidence to reiterate their goal of more than doubling the number of restaurant locations in North America. As of March 31, it had 3,014 locations, and that number is expected to grow to over 7,000 in the long term. During the March quarter, Chipotle added 51 restaurants. Investors can be encouraged with long term plans.
Impressively, Chipotle’s sales per restaurant are steadily increasing. Average restaurant sales reached $2.6 million, compared to $2.3 million in the same quarter a year earlier. The increase in average sales per restaurant despite the addition of locations indicates that the additions are not cannibalizing existing restaurants and lends more credence to management’s goal of 7,000 locations.
What this could mean for Chipotle investors
Chipotle’s stock is down 14% year-to-date as investors worry about rising costs and their effect on Chipotle’s bottom line. Yet stocks are not cheap. Healthy sales growth in the first quarter is another step in the right direction for the restaurant chain. That said, investors would be cautious to wait for a further decline in the share price before buying shares.
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Parkev Tatevosian holds positions at the Chipotle Mexican Grill. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.