CMG - Chipotle

[JayGatsby]

Or maybe most of their employees are already above min. wage so wage increases won't impact them.

I thought about that, but based on some google searches it looks like the average person is in the $9 - $9.50 range: https://www.glassdoor.com/Hourly-Pay/Chipotle-Hourly-Pay-E15228.htm

[TorontoRaptorsFan]

It's interesting to see how Ackman has taken a far quieter approach in his dealings with Chipotle than he did with other companies such as Herbalife and Valeant.

 

Chipotle managements continues repurchasing lots of shares each quarter. I wonder if this was accelerated as per Ackman's discussions with them.

[JayGatsby]

Chipotle managements continues repurchasing lots of shares each quarter. I wonder if this was accelerated as per Ackman's discussions with them.

Think they used up most of their excess cash already on the buybacks (not the greatest market timing, but it never is). Going forward buybacks will mostly have to be from operating cash flow unless they wanted to take on debt.

[AzCactus]

Is anyone giving this a look here?  The stock is near a 52 week low and when I go maybe 1 or twice a month....their lines are still longer than most restaurants and the company seems aware of their issues.

[hooplaer23]

The company specifically commented yesterday that lines alone might not be the best measure of how well sales are doing:

 

"Mark Crumpacker,  Chipotle Mexican Grill, Inc. - Chief Marketing and Development Officer  I could add a little bit of an answer, there, to the question that you asked. I think Steve's right that in the long run, making these experiences excellent is a top priority. In the near term, I think we have -- the three biggest opportunities are throughput. You know, lines are definitely back at Chipotle, which is a great thing. But part of the reason there's lines sometimes is that throughput is off from our peaks, and there's a bunch of reasons for that, and we're addressing that actively"

[bci23]

The company specifically commented yesterday that lines alone might not be the best measure of how well sales are doing:

 

"Mark Crumpacker,  Chipotle Mexican Grill, Inc. - Chief Marketing and Development Officer  I could add a little bit of an answer, there, to the question that you asked. I think Steve's right that in the long run, making these experiences excellent is a top priority. In the near term, I think we have -- the three biggest opportunities are throughput. You know, lines are definitely back at Chipotle, which is a great thing. But part of the reason there's lines sometimes is that throughput is off from our peaks, and there's a bunch of reasons for that, and we're addressing that actively"

 

Good to hear them say this cause I think it is a HUGE problem for the company right now in my recent experiences.

[DooDiligence]

The company specifically commented yesterday that lines alone might not be the best measure of how well sales are doing:

 

"Mark Crumpacker,  Chipotle Mexican Grill, Inc. - Chief Marketing and Development Officer  I could add a little bit of an answer, there, to the question that you asked. I think Steve's right that in the long run, making these experiences excellent is a top priority. In the near term, I think we have -- the three biggest opportunities are throughput. You know, lines are definitely back at Chipotle, which is a great thing. But part of the reason there's lines sometimes is that throughput is off from our peaks, and there's a bunch of reasons for that, and we're addressing that actively"

 

Do you think it was addressed by getting rid of Moran & his people culture?

[no_free_lunch]

Some commentary on CMG in pershing square's q3.  They are still long.

 

https://assets.pershingsquareholdings.com/media/2016/12/07154947/Pershing-Square-3Q2016-Investor-Letter-PSH.pdf

[TwoCitiesCapital]

Some commentary on CMG in pershing square's q3.  They are still long.

 

https://assets.pershingsquareholdings.com/media/2016/12/07154947/Pershing-Square-3Q2016-Investor-Letter-PSH.pdf

 

Of course they are. When has Ackman every admitted that he was wrong this early?

 

;)

 

Not saying he is, of course. Just saying he wouldn't admit it this early regardless.

[DooDiligence]

He sold Zoetis?

 

Granted it may be getting ahead of itself value wise but I think I would have let that continue running.

 

Holding on to VRX & CMG & giving up on Zoetis seems kind of daft to me but WDIK I'm just a retail investor...

[fareastwarriors]

Chipotle Adds Four Board Members in Ackman-Endorsed Shake-Up

https://www.bloomberg.com/news/articles/2016-12-16/chipotle-adds-four-new-board-members-in-ackman-endorsed-shake-up

[DooDiligence]

Chipotle Adds Four Board Members in Ackman-Endorsed Shake-Up

https://www.bloomberg.com/news/articles/2016-12-16/chipotle-adds-four-new-board-members-in-ackman-endorsed-shake-up

 

These seem like good choices.

 

Pershing could conceivably make up for other missteps if they can put Chipotle back on track.

 

Interesting story but I just can't pry my wallet open for retail or restaurants (other than as a customer & Moes remains a threat...)

[JayGatsby]

I was in the UK for a bit and was curious to see what the market was for Chipotle. I recognize that the UK is almost meaningless as part of the overall growth story, but I was curious so I thought I'd share in case others are as well:

- "Fast casual" is fairly hard to find in the UK overall. There's a lot more of it in London, particularly in the City (wall street equivalent). There's a ton of prepackaged sandwich/salad places all over the country. McDonald's seems to do really well there overall as in some places it's one of the few places to grab a quick hot meal (McDonald's has 1,250 locations there). I'd expect "the fast casual" segment to grow overall.

- Mexican food overall isn't very well known or popular. Some people really don't like it.

- I went to two Chipotle's in London. Both over a weekend around lunch time. Both had a good crowd... not a big line, but enough to be successful. Probably do better during weekday lunch rushes, similar to locations in the states. There was a fairly international crowd, but that's London in general so hard to say if the overall demographics were any different than the overall demographics of downtown London.

- There's a very similar concept called BarBurrito that has 14 locations throughout the UK and is growing (https://barburrito.co.uk/restaurants/). Food taste there was significantly inferior to Chipotle in my personal opinion.

- In Ireland there's a similar concept called BooYum (http://www.boojummex.com/locations/) that has 8 locations and is also growing. The Belfast location was doing very well when I walked past and has really good reviews online.

- As far as I can tell from the website, there are 6 Chipotle locations in the UK, all in London. I'd expect Chipotle to to grow in the UK, although whether it can move the overall valuation needle is a totally different question.

[villainx]

I was in the UK for a bit and was curious to see what the market was for Chipotle. I recognize that the UK is almost meaningless as part of the overall growth story, but I was curious so I thought I'd share in case others are as well:

 

Thanks.  Good food for thought.

[johnny]

The international expansion bull case is substantially the same today as it was three years ago, which I think should weigh heavily on how much credibility we assign to it.

[TorontoRaptorsFan]

I was told that there were another 7 locations opening up here in Ontario.

 

A new location opened up near my house and the manager there said he had to go on a hiring spree since they severely underestimated the foot traffic they would receive. Needless to say lunchtime there has long lineups so I only go there at night.

 

 

 

 

[johnny]

I think Ontario has the same problem/tailwind London has, which is that there are more than enough home-sick and uncreative Americans to saturate the first few stores, especially when they first open. That said, if it was going to succeed anywhere, I'd expect Canada to work out, since there's such general cultural overlap with the USA.

 

But beyond that, I don't see how they achieve anything like the 2014 dreams of international store-count without seriously compromising their position on menu simplicity and ingredient sourcing. All the prior successes of brand internationalization have involved shameless and grotesque local market optimization. Will Chipotle begin cutting their guacamole with sesame oil and vinegaring their rice to make it in Japan? Are they going to build the organic, fair-trade pinto bean supply chain in Malaysia from scratch?

[TorontoRaptorsFan]

Lots of people visiting the U.S. have eaten at Chipotle. I'm sure many of them had a wonderful experience there.

 

There's plenty of time for Chipotle to expand their operations. They have plenty of name brand recognition that if they felt it was necessary to expand overseas they would target prestigious locations ie- a city's flagship shopping mall.

 

In Canada they're currently targeting Ontario and B.C. They have a long way to go to saturate the market here with locations. They're doing an excellent job of picking key locations in the GTA area. I'm curious to see how they proceed with Pizzeria Locale. They are sitting on a gold mine with that franchise.

 

I'm curious to see what Ackman has in mind with Chipotle. I wouldn't be surprised if Chipotle was buying back more shares.

 

 

[Vish_ram]

I'm seeing some subtle changes.

 

The places that i go to aren't crowded anymore. They removed fresh lemons. The bell pepper/onion is no longer fresh, looks old stuff. They removed knife & spoon, just only fork.

[TorontoRaptorsFan]

Looks like things have done well this year. I'm up well over 20% and climbing.

Looks like a price increase is starting to get implemented in some restaurants.

 

http://www.barrons.com/articles/one-sign-chipotle-isnt-in-damage-control-mode-anymore-1492636031

 

 

[glorysk87]

i've been going to my local chipotle once a month or so since the crisis just to keep tabs on traffic. during and shortly after the crisis, there would maybe be 2 or 3 people in there for lunch when i visited.

 

in the last month or so it has been absolutely BOOMING with people. at least 30 people in there at any time i go. and this isn't a huge unit.

 

just some anecdata for you all.

[BRK7]

i've been going to my local chipotle once a month or so since the crisis just to keep tabs on traffic. during and shortly after the crisis, there would maybe be 2 or 3 people in there for lunch when i visited.

 

in the last month or so it has been absolutely BOOMING with people. at least 30 people in there at any time i go. and this isn't a huge unit.

 

just some anecdata for you all.

 

I started using the online ordering recently.  My initial online order was mainly done to satisfy my curiosity, and I really didn’t think I’d order online again.  But it sure was nice to arrive at the restaurant, bypass about 20 people waiting in line to order, and pick up my order immediately at the cash register (having already paid online).  Literally took seconds.  Going forward, I suspect I will use online ordering more often than not.

 

Anyway, it will be interesting to learn on next Tuesday afternoon what been happening with comps and margins.

 

[TorontoRaptorsFan]

http://fortune.com/2017/02/20/chipotle-digital-orders-investment/

 

Curt Garner was hired as the Chief Information Officer a couple of years ago. The same position he previously held at Starbucks.

 

The location near my house frequently runs out of items because they have busloads of church goers or kids playing in hockey tournaments showing up en masse and ordering everything and anything.

[AzCactus]

Is anyone thinking about this again at these prices?  I might be harnessing my inner Buffett but you have a good company going through a rough patch.  This company probably has the ability to raise prices over time (they don't claim to be the cheapest) and now have the CEO who founded the company way back when. 

[JayGatsby]

Is anyone thinking about this again at these prices?  I might be harnessing my inner Buffett but you have a good company going through a rough patch.  This company probably has the ability to raise prices over time (they don't claim to be the cheapest) and now have the CEO who founded the company way back when.

I was looking at it a bit yesterday. I own a good amount, but agree it's getting attractive (again). The stores I go to all seem to be doing fairly well just based on looking around, although I don't know how they did two years ago. They should be able to increase prices as things normalize.  The data point I always go back to is in 2015 they did $900M of EBITDA with ~2000 ending stores. By the end of this year they should be just under 2500 stores. So with 25% more stores, getting back to a similar EBITDA level doesn't seem like a huge stretch. Last quarter they did $116M, so definitely some work left to get back to that level though. If they got back to $900M they're probably slightly undervalued assuming a run-rate, so you also have to believe they can keep opening 200 new stores a year with good margins. The industry has definitely gotten more crowded with some good new local options in places I've been recently.

 

I was just reading a book on Wayne Huizenga and Blockbuster. When they invested in Blockbuster it was a bit like early Chipotle... new concept, great unit economics, low barriers to entry, everybody knew it was going to be a big thing. He knew he had to rush it to market and at times was opening 400+ stores a year and buying competitors. Chipotle's been opening 200-250 for as long as I can remember... healthy number but I wish they'd gone faster. Obviously that doesn't impact the current valuation, I just thought it was an interesting comparison.