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Chipotle is a Mexican-inspired fast-casual restaurant chain selling tacos, burritos, burrito bowls, and salads. The company was founded in 2003 in Denver by Steve Ells, who wanted to model the restaurant concept after burrito stores he ate at while working as a chef in San Francisco. Today, Chipotle operates about 3,800 locations in the U.S., Canada, U.K., France, Germany, Kuwait, and United Arab Emirates. It employs more than 130,000 people.

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Chipotle Mexican Grill (CMG): Company Profile, Stock Price, News, Rankings

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Chipotle Mexican Grill

chipotle mexican grill

Good day, and welcome to the Chipotle Mexican Grove Fourth Quarter twenty twenty four Results Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note today's event is being recorded. I would now like to turn the conference over to Cindy Olsen, Head of Investor Relations and Strategy.

Hello, everyone, and welcome to our fourth quarter and full year fiscal twenty twenty four earnings call. By now, you should have accessed our earnings press release. If not, it may be found on the Investor Relations website at ir.chipotle.com. I will begin by reminding you that certain statements and projections made in this presentation about our future business and financial results constitute forward looking statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projected in the forward looking statements.

Please see the risk factors contained in our annual report on Form 10 ks and in our Form 10 Qs for a discussion of risks that may cause our actual results to vary from these forward looking statements. Our discussion today will include non GAAP financial measures. A reconciliation to GAAP measures can be found via the link included on the presentation page within the Investor Relations section of our website. We will start today's call with prepared remarks from Scott Bowright, Chief Executive Officer and Adam Reimer, Chief Financial Officer, after which we will take your questions. Our entire executive leadership team is available during the Q

and A session. And with that, I will turn the call over to Scott.

Thanks, Cindy, and good afternoon, everyone. I speak on behalf of everyone at Chipotle when I say that we are deeply saddened by the devastation caused by the recent wildfires in Southern California. The safety of our restaurant teams and guests is a top priority.

And fortunately, I'm pleased to report that our team members are safe and the impact of our business has been minimal. In response to this tragedy, Chipotle has provided thousands of burritos to firefighters and first responders, committed $1,000,000 in free meals to those impacted, as well as made donations through our Cultivate Foundation to charitable organizations aiding in the relief efforts. We also feature the American Red Cross in our app to provide our guests a way to donate by rounding up their change. I want to thank our employees and our guests for helping to support the recovery efforts in the affected communities. Now turning to our business update.

Chipotle had another outstanding year delivering strong transaction driven comps each quarter, expanding margins, opening over 300 restaurants, gaining momentum in key industry leading brand metrics, making progress on many back of house initiatives and building our footprint internationally. For the fiscal year twenty twenty four, sales grew about 15% to reach $11,300,000,000 driven by a 7.4% comp including over 5% transaction growth. Digital sales of $3,900,000,000 represented 35% of sales. AUVs increased to 3,200,000 Restaurant level margin was 26.7%, an increase of 50 basis points year over year. Adjusted diluted EPS was $1.12 representing 24% growth over last year and we opened a record three zero four new restaurants including two fifty seven Chipotan's.

Our fourth quarter results were also impressive, especially considering that we are lapping the very successful Carne Asada limited time offer from last year. Additionally, we experienced some volatility around the December holidays, which we believe was impacted by the calendar shifts this year. Despite this, we were able to grow transactions by 4% in the quarter, driven by continued improvement in throughput as well as the successful rollout of brisket as a limited time offer. For the fourth quarter, sales grew over 13% to reach $2,800,000,000 driven by a 5.4 comp. Digital sales were 34% of sales.

Restaurant level margin was 24.8%, a decline of 60 basis points year over year. Adjusted diluted EPS was $0.25 representing 19% growth over last year and we opened 119 restaurants including 95 Chipotle lanes. Considering our underlying trends as well as our incremental throughput opportunity and strong marketing plan, we believe we can continue to drive positive transaction comps in 2025 and anticipate annual comps to be in the low to mid single digit range. Adam will provide more details on this in just a few minutes. Now before I dive into an update on our strategies, I want to take a minute to share a key takeaway from our Leadership Summit we held in November.

An important theme we are prioritizing is to be guest obsessed. I want to make sure that as we continue to scale Chipotle, everything we do is in service of our guests or those who serve our guests. This will require an understanding and a focus on how each role in the organization ladders up to making the experience in our restaurants better every day. A guest obsessed mindset is crucial to ensuring that we continue to deliver against our five key strategies that helped us win today while we grow the future. And these strategies include running successful restaurants with a people accountable culture that provides great food with integrity of delivering exceptional in restaurant and digital experiences, amplifying technology and innovation to drive growth and productivity at our restaurants, support centers and in our supply chain making the brand visible, relevant and loved to acquire new guests and improve overall guest engagement sustaining world class people leadership by developing and retaining top talent at every level, and expanding access and convenience by accelerating our restaurant openings in North America and internationally.

I will start with our operations and our focus on throughput. One key driver of running successful restaurants is an experienced General Manager who understands the importance of throughput and can train and develop a crew to execute the four pillars consistently every day. The good news is our GM turnover continued to improve in 2024 is among the lowest levels in the company's history. More stability among our GMs results in more stability in our restaurants and stability coupled with consistent training and reps has been a big driver of the progress we have seen. In 2024, throughput improved by about two entrees in the peak fifteen minute period and we achieved our near term goal to reach the mid-20s.

Our support centers and restaurant leadership teams continue to find ways to improve our ability to execute the four pillars. For example, our weekly throughput reviews conducted across our restaurant support centers help to keep us top of mind and give our restaurant leaders information to provide coaching and feedback to drive improvement as well as celebrate excellence. We also made the decision last quarter to have the manager on duty responsible for the expo position and this helped to improve the percentage of restaurants with an expo in place to over 60%. While I'm thrilled to see the progress we are making, we still have work to do and throughput remains one of our biggest priorities and opportunities in 2025. One of the important unlocks this year will be our focus on modernizing the back of house to improve the team member experience and the speed and simplicity of prep, while maintaining our high culinary standards.

This will ensure more restaurants complete prep on time, which will enable better execution of the four pillars during peak periods and this brings me to amplifying technology. We have several innovative tools that we are testing to improve the prep process. As we mentioned last quarter, we are currently in the middle of rolling out the produce slicers to all restaurants and expect the rollout to be complete by this summer. Fresh chopped produce in our restaurants each day is key to maintaining our high culinary standards, but it's also one of the most time consuming tasks. The slicer improves the experience for our team members by reducing the time to chop produce and improve the culinary by ensuring consistent cut sizes.

As we have mentioned in the past, some of the efficiencies from the produce slicer will help offset the investment we made last year ensuring generous portion sizes. Over the last several months, we also began a new initiative in a patch of restaurants to better understand the synergistic benefits of installing the produce slicer, the dual sided plancha, the three pan rice cooker and the dual vat fryer in the same restaurant. As a reminder, the dual sided plancha cooks the chicken and steak in under half the time it takes on the traditional plancha with the same sear and char and better consistency and juiciness. The News Rice Cooker eliminates the large rice pots and cooks the rice on the pans that you see on the line, which creates more consistent quality and streamlines the rice cooking process. And the dual back fryer doubles the capacity for frying our chips resulting in better quality and reducing the time it takes while ensuring consistent availability.

Based on the initial results, we have decided to roll out all four pieces of equipment to new restaurant openings beginning later this year. And as we gain more data and insights into this initiative, we will determine if and how we roll out more broadly to existing restaurants. This is a great example how we're beginning to look at our tools and processes and conventions holistically rather than as bolt on additions. The end goal is to improve the experience for our teams by making tasks easier to execute, more efficient, faster and more consistent while maintaining our high culinary standards. We are also pursuing long term innovations to our stage gate process including Avocado, our device that cuts cores and scoops avocados and our augmented digital make line, both of which are being evaluated on a test basis.

While it is early in our learnings on these opportunities, we are making progress and remain optimistic about each of these innovative tools. When we improve the experience for our restaurant teams, it ladders to a better guest experience. Exceptional in restaurant and digital experiences coupled with our powerful marketing strategy to make the brand more visible, more relevant and more loved builds the brand momentum and results in year after year of transaction growth. Our marketing strategy in 2024 was nothing short of exceptional with a strong brand campaign and two very successful limited time offers, including chicken al pastor and brisket, both of which surpassed our expectations and drove incremental transactions and spend. This helped to further strengthen our brand as we ended the year leading and gaining momentum in in important categories like high quality ingredients, value for the money, healthy and nutritious, good amount of food for the money and brand I love.

And we have a strong plan for 2025 to keep the momentum going. We started off the year by putting a spotlight on our lifestyle goals and to encourage and reward healthy habits among our guests in North America and Europe and our second partnership with Strava, the app for active people with over 135,000,000,000 users and more than 190 countries. With health and wellness top of mind for our guests, this is a great way to show how the Chipotle ingredients can be customized to fit and fuel any dietary restrictions or lifestyle routines. Additionally, I think it's no secret that our Chipotle Honey Chicken pilot was a success. It was our best performing limited time offer both in early sensory testing as well as the broader two market tests and you will see it in our restaurants in the near future.

We will also continue to reinforce our brand story of high quality responsibly sourced ingredients made fresh every day through our behind the foil advertising campaign. This campaign which features our real teams preparing our delicious food has certainly resonated with our guests who are not just buying our brand, but buying into our brand and our purpose to cultivate

our teams, last year was another tremendous year of opportunities and growth with over 23,000 people promoted of which over 85% of all restaurant management roles were internal promotions. We also promoted three regional vice presidents who started as crew members and now five of our 11 regional vice presidents started his crew and worked their way up to the highest level of operations, managing a region of the country with sales over $1,000,000,000 Collectively, these five RVPs have over one hundred years of experience at Chipotle. To be promoted to an RVP, not only do they need to run a successful sub region, but they also need to show the ability to develop and grow future leaders. And these five have developed and promoted over 30 team directors, nearly 100 field leaders and hundreds of general managers. These are life changing careers for the RVPs as well as the leaders they are developing along the way.

I think this is a testament to our leadership development capabilities as an organization, which I couldn't be prouder of. At the end of the day, our business wins when we lean into the growth and development of all Chipotle team members. Finally, moving to expanding access. 2024 was another outstanding year with three zero four new restaurant openings, including two fifty seven Chipot Lanes, making it a second year in a row of record openings. We continue to anticipate between three fifteen and three forty five new openings in 2025 with at least 80% including a Chipotle Lane.

I'm excited to share that we recently surpassed our one thousandth Chipotle Lane and now this drive thru format makes up over 25% of our restaurants. On average, the Chipotle takes less than thirty seconds to complete the order pickup process. The added convenience has been incremental as Chipotle's continue to generate better revenues, margins and returns than non Chipotlanes opened at the same time. It can also be seen in the mix of business as Chipotlanes have a larger pickup mix, mostly offset by lower delivery mix. Shifting to outside The U.

S, we now have 85 international restaurants, including 55 in Canada, Twenty Seven in Europe and three in The Middle East. As we mentioned last quarter, we're proving that Chipotle resonates across geographies and we will accelerate growth in Canada and The Middle East in 2025. We will also continue to make progress on proving out the economic model in Europe and begin to build a pipeline for growth. To conclude, 2024 was another year of milestones including growing transactions of 5% and surpassing $3,200,000 in AUV, reaching 1,000 Chipotlanes, opening our first restaurants in The Middle East and making tremendous progress in Europe. I want to thank our 130,000 employees for your hard work last year.

The amount of talent and passion we have is more than most businesses could ever hope for. I don't take that for granted and I'm proud to be a part of this great organization that prioritizes our people and their growth. And we continue to have so much growth in front of us as we aim to reach 7,000 restaurants in North America, grow our AUVs beyond $4,000,000 expand margins and make progress toward becoming a global iconic brand. This will require exceptional people, exceptional food and exceptional throughput and a commitment to being guest obsessed. I'm confident that we have the right team to achieve these ambitious goals and that the best is yet to come.

Thanks, Scott, and good afternoon, everyone. Sales in the fourth quarter grew over 13% year over year to reach $2,800,000,000 as comp sales grew 5.4% driven by 4% transaction growth. Our comp included a negative 20 basis point true up related to our loyalty program. As a reminder, in Q4 of each year, we reevaluate the estimated breakage for loyalty points that will expire and this year we decreased our estimate due to higher member engagement. Restaurant level margin of 24.8% declined about 60 basis points compared to last year.

Earnings per share was 0.24 on a GAAP basis and $0.25 on a non GAAP basis adjusted for unusual items representing 19% year over year growth. During the quarter transaction comps were positive in all months driven by the launch of brisket and continued improvement in throughput. As Scott mentioned, we experienced softer trends around the holidays in late December, which we believe was due to Christmas and New Year's falling in the middle of each week. Comps have been volatile so far in 2025 with weather having a larger impact on our sales than what we experienced last year. While we believe underlying transaction trends are healthy and we have a strong plan for the year, we do compare against progressively tougher comps in the first half of the year and therefore are guiding to a low to mid single digit comp for the full year.

There are also a couple of factors to keep in mind when you think about the full year. In the second quarter, we will be rolling off about 90 basis points of pricing in April when we lap the pricing we took last year in California to offset the step up in wages. And Easter will fall back into the second quarter this year, which will negatively impact Q2 comps by about 100 basis points with no net benefit in the first quarter because of leap day in the prior year. I will now go through the key P and L line items beginning with cost of sales. Cost of sales in the quarter were 30.4%, an increase of about 70 basis points from last year.

The benefit of our menu price increase was more than offset by higher usage as we focused on ensuring consistent and generous portions, as well as the mix impact from our premium smoked brisket LTO and inflation across several items, most notably avocados and dairy. Relative to our guidance, avocados were favorable as the year over year step up was less than we anticipated. For Q1, we expect our cost of sales to be in the high 29% range as pricing leverage and the benefit from brisket ramping down will be partially offset by higher costs across several items, most notably avocados and chicken. Our guidance does not include the impact of the new tariffs on items imported from Mexico, Canada and China. We source about 2% of our sales from Mexico, which includes avocados, tomatoes, limes and peppers and less than 0.5% of our sales from Canada and China.

If the recently announced tariffs go into full effect, it would have an ongoing impact of about 60 basis points on our cost of sales. Also, we remain confident that we can offset the 60 basis point portion investment we made in 2024. Recently, we have started to see the impact ease slightly as we expected and we will offset the remainder through efficiencies we have identified within our supply chain as well as several in restaurant initiatives, including the produce slicers. While we expect to realize some of the benefit in the first half of the year, we don't anticipate a full offset until the second half of twenty twenty five. Finally, underlying cost of sales inflation is expected to be in the low single digit range for the first quarter and for the full year, which excludes the normalization of avocado prices, the mix impact from LTOs, the portion investment and any impact from tariffs.

Labor costs for the quarter were 25.2%, an increase of about 20 basis points from last year as the benefit from sales leverage was offset by wage inflation. For Q1, we expect our labor cost to be in the high 24% range with wage inflation in the mid single digit range. We anticipate wage inflation will step down to the low single digit range in Q2 and for the remainder of the year when we lap the nearly 20% step up in wages in California that went into effect in April of last year. Other operating costs for the quarter were 14.5%, a decrease of about 20 basis points from last year. The decrease was driven by sales leverage and a lower delivery mix, partially offset by a true up in insurance reserves.

Marketing and Provo costs were 3% of sales in Q4, a decrease of about 10 basis points from last year. In Q1, we expect marketing costs to be in the low 3% range with the full year to come in the mid 2% range. In Q1, other operating costs are expected to be in the low 14 range. G and A for the quarter was $191,000,000 on a GAAP basis or $175,000,000 on a non GAAP basis, excluding about $12,000,000 related to equity awards granted for retention of key executives and a $4,000,000 increase in legal reserves. G and A also included $133,000,000 in underlying G and A, $32,000,000 related to non cash stock compensation, $8,000,000 related to higher bonus accruals and payroll taxes on equity vesting and exercises and $2,000,000 related to our upcoming field leadership conference, which is scheduled in Q1 for this year.

We expect our underlying G and A to be around $135,000,000 in Q1 and will step up each quarter as we make investments in people and technology to support ongoing growth. We anticipate first quarter G and A will also include around $33,000,000 in stock based compensation, although this amount can move up or down based off our actual performance and is subject to the final twenty twenty five grants, which are issued in Q1. Around $8,000,000 related to employer taxes associated with shares that vest during the quarter and $3,000,000 for costs associated with our biannual field leadership conference in March, bringing our anticipated total G and A in Q1 to around 179,000,000 Depreciation for the quarter was $84,000,000 or 2.9% of sales. For 2025, we expect it to remain around 3% of sales. Our effective tax rate for Q4 was 24.4% for GAAP and 24.6 for non GAAP and benefited from a reduction in non deductible expenses.

For 2025, we estimate our underlying effective tax rate will be in the 25% to 27% range, though it may vary based on discrete items. Our balance sheet remains strong and we ended the quarter with $2,300,000,000 in cash, restricted cash and investments and no debt. During the fourth quarter, we purchased $331,000,000 of our stock at an average price of $59.83 For the full year, we purchased nearly $1,000,000,000 at an average price of $57.21 Going forward, we will continue to opportunistically purchase our stock. During the quarter, the Board authorized an additional $300,000,000 to our share purchase authorization. And at the end of the quarter, we have just over $1,000,000,000 remaining.

To close, I want to thank our 130,000 employees for all your hard work and dedication and delivering an exceptional experience for our guests each and every day. This powers our strong economic model that we continue to protect and grow and allows us to invest back into Chipotle by growing our footprint and furthering our purpose of cultivating a better world. We have a strong plan for 2025 and we look forward to sharing our progress with you in the coming quarters. And with that, let's open it up for questions.

Thank you. We will now begin the question and answer session. Today's first question comes from Sara Senatore with Bank of America. Please go ahead.

Great. Thank you. Just a quick housekeeping and then a question about the food line. So just on the housekeeping, you talked about positive transactions in 2025. So I think you'll have you said you mentioned 90 basis points of price rolling off.

If you don't take any additional price, what does that look like for the full year? I think you would still have some. And then the question about food cost is better than we expected given all the headwinds you highlighted in terms of inflation and portion investments. I guess to the extent that it was better than you thought, what was the impact? Was it benefits from supply chain earlier than you expected?

And have you contemplated tariffs as you think about it going forward? Thanks.

Hi, Sarah. So on your first question, we believe pricing will be somewhere around 2% in 2025. And so that assumes no additional price because if you think about it, we just took about 2% in December that will carry through December of this year. And then we roll off the roughly 1% national impact from the Fastack pricing in April. So that comes to be around 2% for the full year.

And then on your second question, you're right, we came in a little bit better than we guided in Q4 on cost of sales. That was mostly because the step up in avocado prices was a little bit less than we anticipated. It's still happening. It just is more of a timing issue.

Sorry, this is Scott. Sarah, did you have a question around tariffs?

Yes. Just anything I know it's obviously in flux, but to the extent that avocados have been a swing factor, if you wouldn't mind touching on that. Thank you.

Yes. I'll take this one, if you don't mind, Sarah. So our supply chain team has done a remarkable job over the last couple of years with vendor diversification and moving some country of origins out of Mexico proper. Today, we source from both Colombia, Peru, as well as the Dominican Republic. Only about 50% of our avocado supply today is coming out of Mexico.

And I think we said earlier in the prepared remarks, it's about a 60 basis points impact if it is something that sustains for the year.

Thank you. And our next question comes from David Tarantino with Baird. Please go ahead.

Hi, good afternoon. My question is on the comps guidance for the year. I think, Adam, you mentioned a few issues related to the first half. I was just hoping that maybe you could elaborate on how you're thinking the comp trajectory could play out as the year goes on. And I have a follow-up.

Thanks, David. I'll start talking about really January. So if you look at January from a transactions comp standpoint, we ran about a negative 2% and that included a pretty sizable impact from weather as well as the calendar shift, which kind of had people going back to work and to school a little bit later with the New Year's Day falling in the middle of the week and then a very small impact from the wildfires in LA. All of that was about a 400 basis point impact on our comps in January. And so the underlying trend there is closer to about a plus two.

And so if you push that plus two forward for the rest of Q1, we believe that Q1 will come somewhere around flattish on comps. And the reason for that is really when you're looking at February, we're going to be comping over a really successful braised beef barbacoa campaign that we did last year. And that one, the amazing thing about that is we really saw a nice uplift not only in transactions, but also in mix that caused a really nice lift in check. A lot of that sustained. So we don't believe it will hit quite the same way this year because of how much of it sustained.

So that's going to be a bit of a tougher comp as well as the second iteration of Chicken al Pastor hitting in March. It was really pent up demand from the first time that it was in restaurants. And so when that going up as much as it did, that's going to be a really tough comp going into March. And then Easter is also kind of a delay. And so Easter being a few weeks later is going to cause a little bit of a loss in sales in the sense of Easter tends to really spring our burrito season or beginning of kind of that spring step ups that we see.

So the fact that that's happening several weeks later makes us believe that all of those things will lead to kind of a flat transaction comp in the first quarter. And then when you go into the second quarter, really strong comps from the year before. So I think that'll be kind of a low point for us in terms of the comparison for the full year. And then we'll step up in Q3 and Q4 from there to get to that low to mid single digit guide that we have for the full year.

I just want to say David, I apologize. I think Adam said that the comp would be flat for the quarter, but the transactions would be flat for the quarter.

Yes. Thanks for that clarification. I guess, are you assuming a big lift from you mentioned Honey Chicken would be coming pretty soon. Is that embedded in your guidance? Are you assuming something similar out of Honey Chicken as you thought at Chicken Alvestor?

I guess, how should we think about potentially the upcoming launch of that that you signaled?

Yes. Hi, David. It's Scott here. That is not included in the guidance that Adam just gave you. And we typically launch our LTOs around mid to late March.

We do intend to launch a product around that timeframe and we're excited about the marketing calendar for the year. I think Chris and team have done a really nice job of setting up the year to drive positive transactions and we're excited about the LTO we're going to launch in the spring.

Thank you. And our next question comes from David Palmer of Evercore ISI. Please go ahead.

Thanks. As a follow-up on that commentary about the LTO with Honey Chicken lapping Chicken al Pastoros, to some degree, I feel like we all focus on these LTOs as the big driver for comps. It's obviously easy for us to focus on these innovations. But when you think about real comp drivers for the year, I'm wondering what other things you're really thinking about that'll give you momentum as you go through the year? You mentioned throughput.

Do you think that will be as much of a lift this year or maybe even bigger than last year? And maybe you're contemplating certain things that you can do seasonally, maybe personalized marketing initiatives or anything beyond these LTOs that you might be thinking about in terms of a sales driver? Thank you.

Yes. David, you've heard us talk about this idea of having the flywheel really generating outsized performance and the flywheel being inclusive of great operations, great marketing and a great digital strategy. I'll start with operations. I'll tell you our ops teams have never been on better footing as they stand today with regard to staffing app model, the best retention numbers we've experienced in my years with the brand. Culture is really strong in the organization today and we're set up for what could be an extraordinary year around this idea of improving this guest experience, the total guest experience.

We spent a lot of time over the past many years really getting to the heart of extraordinary culinary. Speed down the line has been a key focus. There's more work to do there, David. And I think the unlock for step change improvement there is grounded in this idea of what I'm talking about as modernization of the back of house at Chipotle, which drives efficiency, allows us to be better prepared for the peak period at lunch and dinner, and also allows us to continue to scale this great brand as we endeavor to go to 7,000 restaurants in North America alone. That said, operationally, I feel like we've never been on better footing.

I will continue to lean into obviously the throughput strategies we've deployed in the past and a couple of new ideas we have for this year. As it relates to the marketing calendar, as I said earlier, Chris and team have come forward with a marketing plan that is really extraordinary and probably the best plan we've seen in the branches I've been here as well. We have incremental spend as you know year over year. We have more linear TV this year than last. The LTOs this year are going to be really strong.

We have some new things we're going to test and learn on as it relates to summer months, more on that at a later date. And then with regard to digital, the team is really working on this idea of leaning into the AI assistant to help with customer journeys. I'll give you an example of what that looks like. As a new pre defection journey, when the model detects that a customer's behavior is changing in a particular way that would signal a propensity for churn, we will take them on a new journey with personalized extras and offers to encourage them to reengage. And so I think those things are going to drive meaningful difference within the digital channel.

And so that total flywheel gives me a lot of confidence this year that we'll have positive transactions and continue to move the business forward.

Thank you. And our next question today comes from Lauren Silverman with Deutsche Bank. Please go ahead.

Thank you very much. I wanted to follow-up on the traffic commentary. Underlying traffic in January up to it's a decel from what you've been seeing in recent quarters. As you assess the underlying business and understand there's a lot of noise, any more color on what you're seeing from the consumer, any shifts that you're seeing across cohorts? Just trying to understand how we go from, I I guess, the underlying is plus two, but we're at a down to back up to positive as we move through the year.

Yes. No, I mean, nothing really to report from an income cohort standpoint. I mean, they're all contributing to the comp very nicely and we saw this throughout Q4 and that really hasn't changed going into January. So nothing to report on that side. And I would just say, as we turn the year and we look at what we're comping over last year, I mean, keep in mind that we're comping over a roughly, what 5.3% trans comp from the year before.

And so I think that's probably what you're seeing with some of that step down in terms of the absolute comp.

Thank you. And our next question today comes from Dennis Geiger with UBS. Please go ahead.

Great. Thanks guys. Another one on the comp outlook, if I could, sort of bigger picture cutting through some of the weather noise, the comparisons. Do you guys generally look at the business a little bit longer term as mid single digit from a same store sales algorithm perspective, pick your price, I understand the positive traffic, is that still the right way to think about the business longer term or kind of underlying trajectory? Thank you.

Yes, I'll start and I'll flip it over to Adam. Absolutely, mid single digits is right where we should be as an organization. We'll continue to put forward strategies that will keep us on that pace in the years to come. I think we've demonstrated over the past many years that we can continue to push forward long standing durable earnings and have done a remarkable job with it over the past many years. This year, unfortunately, is off to a rough start and some of that stuff is largely out of our control.

But we have what we believe to be a great plan for the year and guiding the low to mid makes more sense to us based on where we sit today, hits the guidance. But Adam, anything you would add to that?

Thank you. And our next question today comes from Christine Cho with Goldman Sachs. Please go ahead.

Thank you for taking my question. So Adam, you still seem to be pretty cautious about taking additional pricing this year. I just want to understand whether this is a reflection of consumer price sensitivity rising or competitive pressure on value? Or do you think there would still be a runway for incremental pricing if it becomes necessary throughout the year? And secondly, just also if you had any thoughts on the mix component this year?

Sure. So when it comes to pricing, we are comfortable with the level of pricing we're running right now for the inflation that we're seeing in the business. Because as you know, we like to utilize price only to offset inflation and we want to grow our margins through incremental transactions. And so if there were something that came up throughout the year that would be a permanent hit to the business in the form of inflation, we would consider taking price. But at this point, we feel we're well covered based off of what we're projecting.

And then your question about mix. So the mix drag in Q4 was about 70 basis points. Keep in mind 20 basis points of that is related to the loyalty adjustment that we took, which was a multi period adjustment. So it's really outside of that the underlying mix drag was about 50 basis points. And when you're looking at that a little bit closer, it's still driven by a decline in group size and a big component of that decline in group size that we saw in Q4 really happened in those last couple of weeks of December as it relates to that calendar shift.

And then we're continuing it and there was also a benefit. So when you think about the offset or sorry, the offset to that group size decline, benefits really came from brisket being a premium priced item, especially compared to carne asada in the year before. And then I'm happy to report, we're continuing to see strength in sides. And this is coming from queso. This is coming from extra meat and chips.

You probably remember us talking about this for several quarters in a row now. And so that did not change in the fourth quarter. And so those are the main components of that mix.

Thank you. And our next question comes from John Novotka with JPMorgan. Please go ahead.

Hi, thank you. The question is on the labor market for the entire for you and obviously the entire industry. As we went through the end of twenty twenty four and into early twenty twenty five, wage rates have actually been fairly cooperative maybe outside of California, but fairly cooperative and turnover levels across the industry have been fairly low relative to historic averages. So can you comment I guess as why you think that may have happened at this point in the economy? And are you looking for any kind of signs of change?

Maybe there's some certain pockets of change of either strengthening or weakening in the labor market in various points of the country that maybe you're paying attention to that could potentially be a forward indicator? Thank you.

It's a great question and one it's hard to answer as you think about why all of a sudden retention across the industry has improved. I think ours has probably improved at a quicker rate than many others in the industry. And I attribute that largely to our what I believe to be best in class wages, best in class benefits and a great culture. And so as I said earlier, we're at all time highs on staffing as a brand today. As we sit here, we've never been stronger and retention has never been lower.

And I attribute that success to our operations leadership out in the field, really doing a remarkable job, creating the right experiences, the right environment that people feel heard and that they are able to continue to develop and grow and hit their long term career goals for. As it relates to our peer group, I really can't speak to what's happening there. Is there a canary in the coal mine? I haven't seen one. I think we still continue to see strength in the brand, even in the face of extraordinary value wars and value wars meaning value as a price point with some of the big QSR players.

We continue to take share consistently throughout the year, throughout 2024. We can see that continue to see that trend move forward as well. I think that's built on the fact that we create extraordinary value and keep we're still at 30% discount on average to our peer group and the consumer still sees value at Chipotle as benefit over price.

Chipotle Mexican Grill (CMG) Q4 2024 Earnings Call Transcript

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