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Higher Advertising And Food Costs Will Doom Chipotle’s Q4 Earnings

Tuesday, January 10, 2017 6:25
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(Before It's News)

From StockNews.com: Embattled burrito chain Chipotle Mexican Grill, Inc. (NYSE:CMG) early Tuesday pre-announced its fourth quarter earnings numbers, and the results were not pretty.

The Denver-based company released preliminary Q4 EPS results ranging from just $0.50 to $0.58, which is a far cry from the $0.98 that Wall Street was expecting. Chipotle also sees Q4 revenues of $1.035 billion, which is up slightly from last year’s $1.01 billion, but below the consensus analyst estimate of $1.05 billion.

CMG’s comparable sales numbers weren’t much better. The company said that Q4 comps will likely fall -4.8% from last year, in a sign that established stores continue to languish amid higher competition and fallout from a tainted food scandal. Comparable sales, also known as same-store sales, are perhaps the most important measure of a restaurant chain’s health, since they only look at year-over-year sales trends from stores open at least twelve months.

Analysts were looking for comparable sales declines in the -3.5% range for Q4.

Chipotle also expects operating margins for the fourth quarter to be somewhere between 13% and 14%. The company commented via press release:

“During the quarter we incurred higher expenses compared to our originally-forecasted amounts in other operating costs, driven by increased promotional spend and costs related to testing television advertising. Our marketing and promotional expenses during the quarter totaled ~4.7% of sales. We also incurred higher food costs compared to our originally-forecasted amounts as a result of increased market costs for avocados.”

The silver lining of the announcement, if there is one, is CMG’s slight bump to its current $2.1 billion share buyback program. The company now plans an additional $100 million worth of stock repurchases.

Chipotle Mexican Grill, Inc. shares was unchanged in premarket trading Tuesday. Year-to-date, CMG has gained 4.70%, versus a 1.31% rise in the benchmark S&P 500 index during the same period.

CMG currently has an StockNews.com POWR Rating of C (Neutral), and is ranked #32 of 54 stocks in the Restaurants category.

ETF investors will want to keep an eye on the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF today, which has the largest exposure to CMG out of all ETFs at 0.96% of its total holdings.

This article is brought to you courtesy of StockNews.com.

You are viewing an abbreviated republication of ETF Daily News content. You can find full ETF Daily News articles on (www.etfdailynews.com)

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