CHIPOTLE MEXICAN GRILL INC CMG

Chipotle is prioritizing a 'guest obsessed' mindset, ensuring all roles contribute to improving the restaurant experience. This includes fostering a people-accountable culture, improving GM turnover, and enhancing throughput. GM turnover reached its lowest levels in company history in 2024, contributing to greater stability and consistent training in restaurants. This operational strength is foundational to delivering exceptional in-restaurant and digital experiences.

In 2024, throughput improved by approximately 2 entrees during the peak 15-minute period, reaching the mid-20s. A key focus for 2025 is modernizing the back-of-house to improve team member experience, prep speed, and consistency. This involves rolling out produce slicers (expected complete by summer) and testing a synergistic equipment package including dual-sided Planchas, 3-pan rice cookers, and dual-vat fryers. This equipment aims to make tasks easier, more efficient, and consistent while maintaining culinary standards.

The company is actively pursuing technology to drive growth and productivity. Produce slicers are being rolled out to all restaurants, expected to be complete by summer, improving prep time and consistency. A new initiative is testing the combined benefits of produce slicers, dual-sided Planchas, 3-pan rice cookers, and dual-vat fryers in a patch of restaurants. Based on initial results, this equipment package will be rolled out to all new restaurant openings starting later in 2025. Long-term innovations like Autocado and an augmented digital make line are also being evaluated on a test basis.

Chipotle's 2024 marketing strategy was highly successful, featuring strong brand campaigns and two successful limited-time offers (Chicken al Pastor and Brisket) that drove incremental transactions. This strengthened brand metrics, particularly in categories like high-quality ingredients and value. For 2025, plans include a partnership with Strava for Lifestyle Bowls, the upcoming launch of the Honey Chicken LTO, and continued 'Behind the Foil' advertising to reinforce brand story and purpose.

Chipotle reported a tremendous year for employee development in 2024, with over 23,000 promotions, of which more than 85% of restaurant management roles were internal. Notably, 3 regional vice presidents were promoted who started as crew members, bringing the total to 5 out of 11 RVPs with over 100 years of combined experience. This highlights the company's strong leadership development capabilities and commitment to internal career progression.

The company achieved a record 304 new restaurant openings in 2024, with 257 featuring Chipotlanes, bringing the total Chipotlane count to over 1,000 (more than 25% of all restaurants). Chipotlanes continue to generate better revenues, margins, and returns. For 2025, 315 to 345 new openings are planned, with at least 80% including a Chipotlane. Internationally, Chipotle now has 85 restaurants (55 Canada, 27 Europe, 3 Middle East) and plans to accelerate growth in Canada and the Middle East, while building a pipeline for Europe.

January 2025 saw a negative 2% transaction comp, primarily due to a 400 basis point impact from severe weather and calendar shifts. The underlying transaction trend was closer to positive 2%. Q1 comps are expected to be flat due to tough comparisons against successful LTOs (Braised Beef Barbacoa, Chicken al Pastor) from the prior year and the later timing of^📎 Easter. Q2 is anticipated to be a low point for comps due to lapping California pricing and the Easter shift, with improvement expected in Q3 and Q4 to reach the full-year low to mid-single-digit guidance.

Q4 cost of sales increased 70 basis points year-over-year, driven by higher usage, the premium Brisket LTO mix, and inflation in avocados and dairy. For Q1 2025, cost of sales is expected in the high 29% range, with higher avocado and chicken costs partially offset by pricing leverage. Management noted a potential ongoing 60 basis point impact on cost of sales if new tariffs on Mexican, Canadian, and Chinese imports are fully implemented. The 60 basis point portion investment from 2024 is expected to be fully offset by H2 2025 through efficiencies and produce slicers.