Pershing Square Believes Chipotle Mexican Grill (CMG) is One of the Best-Positioned Consumer Companies

Pershing Square Holdings, an investment holding company, released its second quarter 2022 investor letter. A copy of the same can be downloaded here. The fund generated NAV performance of -26% at the end of the first half, which was slightly higher than the total shareholder returns of -27.3%. Through August 16, 2022, the fund returned -10.8% compared to a -8.8% return for the S&P 500 index. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.

Pershing Square Holdings discussed stocks like Chipotle Mexican Grill, Inc. (NYSE:CMG) in the second quarter investor letter. Headquartered in Newport Beach, California, Chipotle, Mexican Grill, Inc. (NYSE:CMG) operates Chipotle Mexican Grill restaurants. On September 15, 2022, Chipotle Mexican Grill, Inc. (NYSE:CMG)  stock closed at $1,710.65 per share. One-month return of Chipotle Mexican Grill, Inc. (NYSE:CMG)  was 0.00% and its shares lost 10.81% of their value over the last 52 weeks. Chipotle Mexican Grill, Inc. (NYSE:CMG)  has a market capitalization of $47.496 billion.

Here is what Pershing Square Holdings specifically said about Chipotle Mexican Grill, Inc. (NYSE:CMG)  in its Q2 2022 investor letter:

“Chipotle Mexican Grill, Inc. (NYSE:CMG) continued its impressive performance in 2022 driven by the ongoing recovery of in-restaurant sales, price increases to cover cost inflation, and successful menu innovation including pollo asado. During the second quarter, Chipotle continued to lead the restaurant industry in growth for both same-store sales (“SSS”) and new restaurants, with SSS growing 10% year-over-year or 30% on a three-year cumulative basis. On-premise sales grew 36% as consumers resumed pre-pandemic routines, while digital sales declined only 3%, continuing their persistence despite the growth of conventional sales. Chipotle remains on track to grow its store base by approximately 8% this year with a longer-term annual store growth aspiration of nearly 10% once current headwinds around construction, permitting, and supplies ease.

We believe Chipotle is one of the best-positioned consumer companies for the current inflationary world. Given significant inflation in food and labor costs, management has planned a menu price increase of approximately 4% for August following a similarly-sized price increase in March. The company has tremendous pricing power due to the superb quality of its food which is priced at a discount to many competitors with inferior offerings, marketing focused on food quality and freshness rather than cost, and a customer base that over-indexes to higher-income consumers, some of whom are trading down from pricier alternatives.

Chipotle’s economic model remains firmly intact, with restaurant-level margins in excess of 25% in the second quarter, up 0.8% year-over-year, and a consistent level of profitability expected for the current quarter. The company is debt-free and generates nearly all its sales in the U.S., insulating its earnings from the foreign currency headwinds facing many other large consumer companies. …” (Click here to read the full text)

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Chipotle Mexican Grill, Inc. (NYSE:CMG)  is not on the list of  30 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios were held by Chipotle Mexican Grill, Inc. (NYSE:CMG)  at the end of the second quarter which was 38 in the previous quarter.

We discussed Chipotle Mexican Grill, Inc. (NYSE:CMG) in another article and shared buy-the-dip restaurant stocks to invest in now. In addition, please check out our hedge fund investor letters Q2 2022 page for more investor letters from hedge funds and other leading investors.

Disclosure: None. This article is originally published at Insider Monkey.