CMG - Chipotle Mexican Grill, Inc. - Q2 2013 Earnings Call Transcript

    Company Name:Chipotle Mexican Grill, Inc.
    Event Title:Q2 2013 Earnings Call Transcript
    Event Date:18-Jul-2013
    Event Time:04:30 PM ET



    Good afternoon and welcome to the Chipotle Mexican Grill Second Quarter 2013 Earnings Conference Call. All participants are now in a listen-only mode. After the speakers remarks, there will be a question-and-answer session. [Operator Instructions]. As a reminder this conference is being recorded. Thank you. I would now like to introduce Chipotle's Director of Investor Relations, Alex Spong.

    You may begin your conference.

    Alex Spong

    Investor Relations
    Thank you. Hello everyone and welcome to our call today. By now you should have accessed to our earnings announcement released this afternoon for the second quarter 2013. You may also be found on our website at in the Investor Relations section.

    Before we begin our presentation, I will remind everyone that parts of our discussion today will include forward-looking statements as defined in the securities laws. These forward-looking statements will include projections of a number of restaurants we intend to open, comp restaurant sales increases, timing and impact of menu price increases, trends and food cost , marketing spend and other expense items effective tax rates, stock repurchases, and shareholder returns as well as other statements of our expectations and plans.

    These statements are based on information available to us today and we are not assuming any obligation to update them. Forward-looking statements are subject to risks and uncertainties that could cause our actual results to differ materially from the forward-looking statements. We refer you to the risk factors in our annual report on Form 10-K as updated in our subsequent Form 10-Qs for a discussion of these risks.

    I'd like to remind everyone that we've adopted a self-imposed quiet period restricting communications with investors during that period, that quite period begins in the first day of the last month of each fiscal quarter and continues until the next earnings conference call. For the third quarter it will begin September 01 and continue through our third quarter release in October. On the call with us today are Steve Ells, our Chairman and Co-Chief Executive Officer, Monty Moran Co-Chief Executive Officer and Jack Hartung, Chief Financial Officer. With that I will now turn the call over to Steve.

    Steve Ells

    Chairman and Co-Chief Executive Officer
    Thanks Alex. Well 20 years ago this month I opened the first Chipotle near the University of Denver. I had no idea that this little restaurant will someday become more than over 1,500 restaurants and that together with over 42,000 team members would be changed in food culture in this country. When I opened that first restaurant, I wanted to show that just because food is fast didn't mean it had to be a typical fast food experience.

    So, our stress over every ingredient and the team and I worked very hard every day to make sure that we served delicious food to every customer who visited. And today, as a team, we welcome each and every customer as if we were inviting them into our own home, proud to serve that food that we have been working on so hard to prepare. And as a reflect on this journey, we've been on for the last 20 years, it occurs to me that well we're bigger today with a much larger team serving many more customers in many more ways, we're doing just what we did when we opened the first restaurant 20 years ago.

    We still stress over every ingredient that we've raised our expectations to expect not only fresh ingredients but ingredients that are responsibly raised. and our empowered teams with top performers in our restaurants today care just as much as we did back then about making sure every customers feel welcomed and are treated to a delicious meal every time they visit. I am proud of what we've accomplished together over the last 20 years. But even more optimistic about our potential over the next 20.

    We are pleased with our performance for the second quarter of 2013, which included revenues of $816.8 million, an increase of 18.2%. Comp sales increased 5.5% in the quarter and diluted earnings per share increased 10.2% to $2.82. We're particularly pleased with the strength of our performance continues to be driven by our focus on the things that really drive our business our unique people and our unique culture. Throughout the quarter, we continued to make progress in each of these areas. We expanded the rollout of Sofritas, vegan, tortilla to all of our restaurants in California, we're pleased with Sofritas both in terms of the taste and how they're been received by customers.

    As of now Sofritas accounts for between 4% and 5% of our product mix in California. That percentage was higher at the time of launch when there was significant marketing support and we think it will creep back up in time as we gain wider acceptance since many people are still unfamiliar with the idea of tortilla at Chipotle. We are expanding the Sofritas taste to include our restaurants in the Pacific Northwest this month and we are considering additional markets this fall when we expect additional supply to become available of our tofu.

    Many of you have seen that Chipotle recently became the first restaurant committee to voluntarily level GMOs in our food. We made this decision because part of our food with integrity mission is to educate people about the realities of the food they choose to eat. Most consumers don't understand how GMO ingredients are in this country and restaurants and supermarkets. But the fact is that 94% of the soybeans and 88% of the corn in this country are genetically modified.

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