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Lily Morishita

Intro to Business

Capstone Paper: Financials

21 March 2020

Financials: Chipotle Inc.

Financial Summary:

In 2019 Chipotle’s digital sales nearly doubled with shares up 71%. They acquired new

customers by introducing delivery at 95% of locations, adding to their value as a restaurant.

From 2015 to 2019 Chipotle’s total sales and revenue mostly increased from 4.5 billion to 5.95

billion. However, their cost of goods sold also increased. This has caused their gross income to

have a slight decrease from 1.04 billion to 929.71 million. Chipotle is expected to continue
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seeing growth in their income in the future.

Financial Health:

Large cap companies like Chipotle are considered financially healthy if their debt-to-equity

ratio is under 40%. Chipotle’s debt-to-equity ratio is incredible at 0, meaning they have no debt,

and they can meet all their liability obligations. This means it is extremely low risk for company

and shareholders.

Sales:
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Chipotle averaged about $2 million in sales per year from 2015 to 2019. Despite costs rising, so

do their sales. They combat this for example by raising the costs of guacamole. Customers are

happy to pay a little extra because of Chipotle’s customer service and quality. In store, there is

almost no possibility of mistakes in orders since it is completed in front of the customer.

Chipotle has also added the convenience of digital pick up shelves which only added to their

increase in sales.

Profitability:

Chipotle is very profitable, more profitable than McDonalds by bringing in more money per

store. Chipotle keeps their locations company owned to ensure high quality and uniformity

across the board. Many franchised restaurants can have issues in quality by trying to cut
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employee costs or buying subpar ingredients. Despite the negative image that the fast food

industry has, Chipotle’s sales and profits are still growing.

Covid-19:

During times with Covid-19, the restaurant industry has lost a significant part of their

business. Researchers at NPD Group estimated a 36% decline in customer traffic for the week

ending on March 22. However, the CFO Jack Hartung is confident that Chipotle can handle this

loss in sales, claiming that Chipotle can survive several months to a year with lower sales. This is

most likely due to their $880.8 million in cash and short-term investments. “The company will

save money by delaying the development of new restaurants, cutting-down on executive travel,

and reconsidering the hiring of project consultants. Hartung said that the company is in talks with

landlords about rent deferrals for its restaurants and office locations. Chipotle has closed 2%–3%

of its 2,6000 restaurants” (Nanjapla, 2020).

Deliveries have increased 150% as they have offered free deliver through the month end in April.

Advance orders for pick up had also increased in by 120%. “According to Oppenheimer analyst

Brian Bittner, that is evidence the decline in sales has reached bottom. “This suggests consumers

are now more willing to use restaurants for takeout, particularly amid grocery destocking””(Liu,

2020).
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References

Nanjapla, R. (2020, April 2). Chipotle's CFO Is Confident despite COVID-19 Storm. Retrieved from

https://marketrealist.com/2020/04/chipotles-cfo-confident-despite-covid-19-storm/

Liu, E. (2020, April 22). Chipotle's Same-Store Sales Fell 35% in Late March. Here's Why the Stock

Is Rising. Retrieved from https://www.barrons.com/articles/chipotle-stock-earnings-sales-

pandemic-covid-51587580807

Lock, S. (2020, February 11). Chipotle Mexican Grill average sales per store 2019. Retrieved from

https://www.statista.com/statistics/221465/chipotle-average-restaurant-sales/

Lucas, A. (2019, July 24). Chipotle's stock hits all-time high after earnings top estimates, raises sales

forecast. Retrieved from https://www.cnbc.com/2019/07/23/chipotle-earnings-q2-2019.html

Simply Wall St. (2019, February 8). Is Chipotle Mexican Grill, Inc. (NYSE:CMG) A Financially

Strong Company? Retrieved from https://simplywall.st/stocks/us/consumer-services/nyse-

cmg/chipotle-mexican-grill/news/is-chipotle-mexican-grill-inc-nysecmg-a-financially-strong-

company/