Mexican fast-food chain Chipotle (NYSE: CMG) fell short of the market’s revenue expectations in Q1 CY2025, but sales rose 6.4% year on year to $2.88 billion. Its non-GAAP profit of $0.29 per share was 4.4% above analysts’ consensus estimates.
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Chipotle (CMG) Q1 CY2025 Highlights:
- Revenue: $2.88 billion vs analyst estimates of $2.94 billion (6.4% year-on-year growth, 2.1% miss)
- Adjusted EPS: $0.29 vs analyst estimates of $0.28 (4.4% beat)
- Adjusted EBITDA: $604.1 million vs analyst estimates of $572.7 million (21% margin, 5.5% beat)
- Operating Margin: 16.7%, in line with the same quarter last year
- Free Cash Flow Margin: 14.3%, down from 16.2% in the same quarter last year
- Same-Store Sales were flat year on year (7% in the same quarter last year)
- Market Capitalization: $63.84 billion
"While our first quarter results were impacted by several headwinds including weather and a slowdown in consumer spending, our teams continue to make significant progress improving the execution in our restaurants, innovating our back of house, and building Chipotle into a global iconic brand," said Scott Boatwright, Chief Executive Officer, Chipotle.
Company Overview
Born from a desire to offer quick meals with fresh, flavorful ingredients, Chipotle (NYSE: CMG) is a fast-food chain known for its healthy, Mexican-inspired cuisine and customizable dishes.
Modern Fast Food
Modern fast food is a relatively newer category representing a middle ground between traditional fast food and sit-down restaurants. These establishments feature an expanded menu selection priced above traditional fast food options, often incorporating fresher and cleaner ingredients to serve customers prioritizing quality. These eateries are capitalizing on the perception that your drive-through burger and fries joint is detrimental to your health because of inferior ingredients.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $11.49 billion in revenue over the past 12 months, Chipotle is one of the most widely recognized restaurant chains and benefits from customer loyalty, a luxury many don’t have. Its scale also gives it negotiating leverage with suppliers, enabling it to source its ingredients at a lower cost.
As you can see below, Chipotle’s 14.8% annualized revenue growth over the last six years (we compare to 2019 to normalize for COVID-19 impacts) was impressive as it opened new restaurants and increased sales at existing, established dining locations.
This quarter, Chipotle’s revenue grew by 6.4% year on year to $2.88 billion, missing Wall Street’s estimates.
Looking ahead, sell-side analysts expect revenue to grow 12.6% over the next 12 months, a slight deceleration versus the last six years. We still think its growth trajectory is attractive given its scale and suggests the market sees success for its menu offerings.
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Restaurant Performance
Number of Restaurants
The number of dining locations a restaurant chain operates is a critical driver of how quickly company-level sales can grow.
Over the last two years, Chipotle opened new restaurants at a rapid clip by averaging 7.9% annual growth, among the fastest in the restaurant sector.
When a chain opens new restaurants, it usually means it’s investing for growth because there’s healthy demand for its meals and there are markets where its concepts have few or no locations.
Note that Chipotle reports its restaurant count intermittently, so some data points are missing in the chart below.
Same-Store Sales
The change in a company's restaurant base only tells one side of the story. The other is the performance of its existing locations, which informs management teams whether they should expand or downsize their physical footprints. Same-store sales is an industry measure of whether revenue is growing at those existing restaurants and is driven by customer visits (often called traffic) and the average spending per customer (ticket).
Chipotle has been one of the most successful restaurant chains over the last two years thanks to skyrocketing demand within its existing dining locations. On average, the company has posted exceptional year-on-year same-store sales growth of 6.2%. This performance suggests its rollout of new restaurants is beneficial for shareholders. We like this backdrop because it gives Chipotle multiple ways to win: revenue growth can come from new restaurants or increased foot traffic and higher sales per customer at existing locations.
In the latest quarter, Chipotle’s year on year same-store sales were flat. This was a meaningful deceleration from its historical levels. We’ll be watching closely to see if Chipotle can reaccelerate growth.
Key Takeaways from Chipotle’s Q1 Results
We enjoyed seeing Chipotle beat analysts’ EPS and EBITDA expectations this quarter. On the other hand, its same-store sales and revenue fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 3.4% to $47.07 immediately after reporting.
Chipotle may have had a tough quarter, but does that actually create an opportunity to invest right now? We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
