Seeking Alpha
Profile| Send Message|
( followers)  

Chiptole Mexican Grill (CMG) reports 1Q12 results on April 19. The Street expects the company to earn $1.93 per share on $630 million in revenue, and guide $701 million for Q2.

Heading into the earnings, CMG's stock is priced to perfection as rounds of menu price increases have yet to deter patrons from visiting the chain. I note that CMG has been able to achieve double-digit comps over the past six quarters.

Click to enlarge

Despite management's indication of no menu price increase for 2012, I expect another menu price increase on the horizon, most likely in late Q2 or early Q3, to mitigate food inflation. Note that the food price index is highly correlated with oil prices, thus rising food prices will likely follow suit with rising oil prices.

We could see continued unit expansion in strategic international markets, such as Canada and the UK, where CMG's brand has been gaining meaningful traction and that could lead to unit sales that are comparable to the domestic units.

Finally, ShopHouse is off to a good start with no cannibalization impact on CMG's traditional chains. The company recently opened a second location in London and one in Paris, and plans to open two more in London and a second location in DC in the latter half of the year.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Chipotle 1Q12 Earnings Preview: Priced To Perfection, International Growth Gains Traction

Check out Seeking Alpha’s new Earnings Center »