Chipotle Mexican Grill, Inc. (CMG): Spicy Sales with a Small Dash of Caveat Emptor

For Chipotle Mexican Grill and other restaurant chains, such as Darden Restaurants, Inc. (NYSE:DRI), BJ’s Restaurants, Inc. (NASDAQ:BJRI), and others, the concern is cost “trends.”  BJ’s Restaurants’ most recent reported financial results were for their third quarter of fiscal 2012 that ended Oct. 2, 2012. Highlights for the third quarter of fiscal 2012, compared to the same quarter the year prior, included total revenues increasing approximately 16 percent to $175.2 million. Comparable restaurant sales increased 2.3 percent. Net income increased approximately 8 percent to $6.8 million and diluted net income per share increased 9 percent to $0.24. Investors can take note that that BJ’s is also extracting extra sales out of their existing restaurants. BJ’s Restaurants will release their fourth quarter and fiscal 2012 results after the market closes on Tuesday, Feb. 19, 2013.

Darden Restaurants is the world’s largest full-service restaurant company. They own and operate more than 2,000 restaurants. In December 2012, they affirmed their financial outlook for fiscal 2013.  They anticipate total sales growth of between 7.5 percent and 8.5 percent for the year.

In the first week of February, the National Weather Service Climate Prediction Center noted that year-to-date precipitation (to Feb. 5, 2013) was subnormal in the Far West, central and northern Plains, New England, and along the eastern Gulf and southern Atlantic States. However, surplus precipitation fell on the Four Corners Region, southern Plains, most of the Mississippi, Tennessee, and Ohio Valleys, southern half of the Appalachians, and the mid-Atlantic. There’s uncertainty as to how this will all play out for the rest of the year. They further noted that the worst conditions “have stubbornly persisted in the middle third of the Plains, and in central Georgia.”

Investors today must consider many variables when performing due diligence on companies. When considering buying stock of food manufacturers and restaurant chains, they must consider that these companies depend on consistent, quality commodity supplies at stable prices.

The article Spicy Sales with a Small Dash of Caveat Emptor originally appeared on Fool.com and is written by Michael Ugulini.

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