CHIPOTLE MEXICAN GRILL Q1 FY26 earnings call CMG

Revenue grew 7.4% to $3.1 billion, driven by comp sales of +0.5% and a return to positive transaction growth. Management framed the quarter as ahead of expectations, supported by the high-protein line campaign, the return of Chicken Al Pastor and the launch of Cilantro-Lime Sauce, all of which drove incremental transactions. The Recipe for Growth strategy rests on five pillars: protecting/strengthening the core, modernizing the business model with technology and rewards, evolving brand and menu innovation, cultivating talent, and expanding global reach. Momentum reportedly continued into April.

January was strong on the protein campaign — double protein and single tacos rose double digits and sustained through April — but weather closed roughly half of restaurants at one point, costing about 100 bps. February improved on the Chicken Al Pastor launch (highest incidence of its three runs). March softened around the start of the Iran conflict, before a notable April step-up driven by Cilantro-Lime Sauce (incidence ~2x, outperforming Red Chimichurri), the rewards relaunch, and an Easter shift ~2 weeks earlier than the prior year. Q2 comp is guided to roughly +1%.

Restaurant-level margin fell 250 bps YoY to 23.7% (adjusted 40 bps for legal settlements). Cost of sales rose 40 bps to 29.6% as lower dairy/avocado and pricing were more than offset by beef and freight inflation plus higher produce usage; Q2 is expected to step up to ~30%. Labor was 25.7% (+70 bps) on wage inflation, lower AUVs and higher benefits. Other operating costs rose 120 bps to 15.6% on higher marketing, utility and delivery costs. Management expects the price-vs-inflation dislocation to be minimal by year-end as elevated beef costs are lapped.

Loyalty reached 32% of sales in Q1, up 300 bps YoY, on both member growth and higher frequency (Summer of Extras, Freepotle). The refreshed program drove a ~25% increase in daily enrollees and aims to widen the funnel — only ~20% of in-restaurant transactions are linked to rewards versus ~90% of app transactions. New benefits include a chips & guac welcome offer and three monthly 'Chipotle drops' (rewards on repeat), plus UX simplification and an in-development single-scan feature to earn points and pay in one step. Loyalty comps have outpaced non-loyalty for several consecutive quarters, with the gap widening.

Chipotle doubled its LTO cadence, planning four LTOs this year plus additional size and beverage innovation. Add-on protein reached nearly 25% of transactions and stayed elevated. Cilantro-Lime Sauce was the first LTO sauce on the makeline and the first with multiple sizes, delivering higher incidence than Red Chimichurri and Adobo Ranch. Chipotle Honey Chicken relaunched the day before the call. Protein LTOs typically generate a few hundred bps of transaction lift with a durable tail as new guests return. Catering (Chicago/Boston pilots plus a third-party delivery platform) and Build Your Own Chipotle together exceed 2% of combined sales, targeted at double-digit over time^⏳.

The high-efficiency equipment package (Dual-Sided Plancha, Three-Pan Rice Cooker, High-Capacity Fryer) is in over 600 restaurants (+250 QoQ), targeted at 2,000 by year-end and full portfolio by late 2027/early 2028, driving 200-400 bps of comp lift; time savings are being reinvested into throughput and hospitality rather than removed. The Chipotle Kitchen digital makeline is live in 100+ restaurants. AI assistant Ava Cado is expanding from hiring into GM operational insights, scheduling and cook-to-needs guidance. A Zipline drone-delivery pilot will expand to more restaurants in Q2.

GM turnover is at historical lows and stability at a multiyear high; the company is ensuring manager coverage across lunch and dinner and aligning the apprentice role to hospitality. Two senior hires were announced: Fernando Machado as Chief Brand Officer (ex-RBI, Unilever) and Arlie Sisson as Chief Digital Officer (ex-Hyatt). Globally, US/Canada opened 49 in Q1 (on track for ~350 full year); Europe reached 29 restaurants with double-digit margins, ~40% year-2 ROI and positive comps across all countries (record UK opening-day sales at Westfield Stratford). Middle East partner openings face geopolitical delays; Mexico and South Korea openings are expected in 2026, Singapore in 2027.