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In the News:
Chipotle eyes price hike as stock surges
CBS Money Watch
January 31, 2014
Chipotle is deciding weather to raise prices by the end of this year. The company
went up more than 12% today. The company’s overall sales have risen 9.3% over the
past 3 months. But, their biggest competitor McDonalds has experienced a decline of
1.4% for this period. This leaves the question as to why Chipotle wants to raise their
prices. In response to this question, Chipotle executives say that they are taking that into
consideration when deciding weather or not to raise their prices. Chipotle has gain great
popularity in comparison to Burger King or Wendy’s because of their “Food with
integrity model.” Chipotle expects sales to rise significantly in the next year. Their stock
rose 60% since last year.
Farmed and Dangerous’ is Chipotle’s online show about the terrors of
industrial farming
By Valentina Palladino
January 29, 2014
On February 17, Chipotle will debut a new show on Hulu called Farmed and
Dangerous. This four episode series is about a fictional industrial agriculture company
that comes up with a dubious plan to feed cows petroleum-based animal pellets. Those
pellets save the company money, but they also make the cows explode. The show only
mentions Chipotle ones in the four episodes. They chose to put their money into
something viewers would actually like to watch rather than a commercial, which can be
easily ignored.
The following is a list of the last trade price for each day.
January 27, 2014 – 489.31
January 28, 2014 – 491.87
January 29, 2014 – 484.50
January 30, 2014 – 493.96
January 31, 2014 – 560.08
Company Profile
oHeadquarters:
1401 Wynkoop Street, Suite 500
Denver, CO 80202
o Ending date of fiscal year: December 31, 2012
oChipotle is a chain of Mexican “fast-food” restaurants that provide a fine dining
experience and high quality food in a “fast-food” setting.
oChipotle has a majority of their stores in the United States. But, they are also in
Canada, England, and France.
oCo-CEO- Steve Ells
Co-CEO- Monty Moran
CFO – Jack Hartung
CDO – Bob Blessing
CMO – Mark Crumpacker
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Independent Auditors
Ernst & Young LLP
The auditing firm Ernst & Young audited the balance sheets, consolidated
statements of income and comprehensive income, shareholders’ equity and cash flows of
Chipotle Mexican Grill Inc. for the years ending December 31, 2012 and 2011. It is the
company’s sol responsibility to create these financial statements. Ernst & Young’s
responsibility is to make an opinion based on the financial statements given to them by
the company.
Ernst & Young conducted their audit it accordance with the standards of the Public
Company Accounting Oversight Board. Their job is to perform an audit of the
company’s financial statements and make sure they are all accurate. The audit includes
examining the information and making sure there is evidence to support the financial
statements. They also have to examine the accounting principles that the company is
using and whether it is used correctly.
In Ernst & Young’s opinion, the financial statements provided by Chipotle Mexican
Grill, Inc. are presented fine and follow all of the U.S. generally accepted accounting
principles. They also audited the internal control of the financial reporting. Ernst &
Young feels that they are unqualified to make an opinion.
Industry Facts and Future Company Plans
Chipotle is a “fast-food” Mexican restaurant that does not serve the traditional
“fast-food” type of food. Chipotle serves burritos, tacos, burrito bowls (a burrito without
the tortilla) and salads. These products are delivered in a way that is influenced by a fine
dining experience. They use high quality ingredients that are fresh and obtained in an
environmentally and humanitarian way. They have a sleek design and friendly people
working at each of their restaurants. They have coined a phrase that summarizes what
they stand for, “Food With Integrity.” Just as they seek to provide the freshest ingredients
with respect to the animals, farms, and people picking the food, they use a similar idea
when hiring people. They have created a culture that is emphasized on identifying and
empowering top performing employees so that they can develop future leaders from
within the company.
As of December 31, 2012, they have 1,410 restaurants, of which 1,399 are located
throughout the United States, five are located in Canada, five are located in London,
England, and one is located in Paris, France. The company has expanded to opening a
new restaurant called ShopHouse Southeast Asian Kitchen. This restaurant is asian
inspired food that has the same framework as Chipotle. The opening of new restaurants
has contributed greatly to the company’s growth. They opened 183 restaurants in 2012,
and expect to open between 165 and 180 restaurants in 2013, including any new
ShopHouse restaurants.
The average Chipotle restaurant sales were $2.113 million as of December 31,
2012, increasing from $2.013 million as of December 31, 2011. Their restaurant sales
increased by 7.1% in 2012. The sale increase increases in 2012 was primarily because of
an increase in customer visits and menu price increase. Chipotle expects 2013 restaurant
sales to be flat or low single digit increases assuming they don’t increase menu prices.
In all of Chipotle’s restaurants, they strive to serve only meats that are raised
without added hormones and to a set of guidelines that they have set to promote the
welfare of animals. They also use a portion of produce items that are grown organically
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and locally sourced. In specific a portion of their beans are grown using conservation
tollage methods that improve soil conditions, reduce erosion and help preserve the
environment in which they are grown. The sour cream and cheese they purchase is made
with milk that comes from cows that are not given rBGH. These items are bought from
farms that provide cows outdoor access and make their quality of life better. In an effort
to continuously provide quality ingredients they will continue to search for quality
ingredients that not only taste delicious, but also benefit local farmers or the environment,
animals and customers.
Their increase of prices in 2012 was due to the inflation of many of their
ingredients. These ingredients include beef, chicken, and rice. The increase was someone
offset by the dropping price of avocados. They expect for the inflation of food cost to
increase. So as a result of this they may increase food prices after taking into
consideration the general economic environment, consumer confidence, and sales trends.
Financial Statement Details (Two Years)
1. Income Statement
Net Sales: 2012: $2,731,224,000
2011: $2,269,548,000
In the past two years the Net Sales has increased by $461,676,000.
Income from Operations: 2012: $455,865,000
2011: $350,562,000
In the past two years the Income from Operations has increased by
$105,303,000.
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