Coverage: Chipotle’s earnings, sales surprise Wall Street

Chipotle Mexican Grill Inc. beat sales and profit expectations in its latest quarter, continuing to regain its footing after operational problems spooked customers and investors.

Heather Haddon of The Wall Street Journal had the news:

The taco-and-burrito chain on Wednesday reported a profit of $3.13 a share on $88.1 million in income, up from $2.13 per diluted share on $59.4 million in profit in the first quarter of 2018. Excluding restructuring costs and certain other expenses, Chipotle reported an adjusted profit of $3.40 a share.

Shares rose after hours at $711.

Investors have welcomed change at Chipotle under Chief Executive Brian Niccol, who took over the chain last year. They credit him with helping to reverse a more-than-two-year sales slide by improving operations, simplifying its menu and adding convenience options such as drive-throughs and pickup windows.

“If you have a chance to be in a Chipotle lately, I think they have really improved versus where we were,” Mr. Niccol told investors.

Amelia Lucas of CNBC.com reported that the company also boosted its same-store sales outlook:

Same-store sales grew by 9.9%, driven by a 5.8% increase in restaurant transactions. This is the fifth consecutive quarter that Chipotle has seen same-stores growth. The reported same-store sales number includes a 0.30% negative impact in anticipation of customers redeeming loyalty program rewards.

The company raised its same-store sales outlook for 2019. It is now forecasting mid-to-high single-digit sales growth at stores open at least a year. It previously said that it was expected mid-single digit growth.

The company opened 15 stores and closed 2 locations during the quarter, bringing its total restaurant count to 2,504. Chipotle reiterated its forecast of opening between 140 to 155 stores during 2019.

Arjun Reddy of Business Insider reported that Chipotle’s stock is still heavily shorted:

Chipotle shares had previously suffered after food poisoning issues dogged the company in 2017 and 2018. but they have rocketed higher by 64% in 2019 due to initiatives in mobile ordering and digital technology, a rewards program and the launch of new menu items such as the quesadilla. Niccol, the former CEO of rival Taco Bell, has been widely credited for the company’s turnaround.

Despite Chipotle’s striking year to date performance, the company is one of the most heavily shorted stocks according to Ihor Dusaniwsky, Managing Director of Predictive Analytics at the financial-analytics firm S3 Partners. But they have cut their exposure in the face of tremendous losses.

“Chipotle short sellers were selling into the rally for the first 2 1⁄2 months of 2019, incurring $500 million of mark-to-market losses, -36.51%, before reversing course and cutting their CMG exposure,” said Dusaniwsky in a research note.

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