Does Chipotle's Updated Guidance Change Anything?

Chipotle Mexican Grill, Inc. CMG released a regulatory 8-k filing after Monday's market close to "reaffirm and clarify" certain financial and operating metrics.

Chipotle said it still expects food costs for the second quarter to be approximately 34.2 percent of sales. Moreover, marketing and promotional spend is now expected to be up 20–30 basis points versus the first quarter's 3.6 percent to 3.7 percent of sales.

As a result, operating costs as a percentage of sales for the second quarter to be "at or slightly higher" compared to the first quarter, the fast casual restaurant chain added.

Finally, full-year comparable restaurant sales are expected to increase by a high-single digit, and 195–210 new locations are expected to open.

Stephens: Remain Underweight

Stephens' Will Slabaugh maintains an Underweight rating on Chipotle's stock with an unchanged $350 price target following Chipotle's update, which prompted a revised estimate to the downside.

Chipotle is now expected to earn $7.65 per share for the full fiscal year, Slabaugh stated in a research report. This compares to his prior estimate of $8.50 per share and the Street's consensus estimate of $8.46 per share.

Looking forward, Chipotle's business carries multiple concerns, including:

1. The pace of average unit volume recovery.
2. Margin progression versus expectations.
3. Valuation.
4. An unlikely recovery in same-store sales trends and EPS.

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