Chipotle Mexican Grill Inc. (CMG), the restaurant chain with the fastest-growing sales among its peers, said third-quarter profit rose 15 percent as more advertising boosted traffic at its stores.
Net income climbed to $83.4 million, or $2.66 a share, from $72.3 million, or $2.27, a year earlier, the Denver-based company said in a statement yesterday. Analysts projected $2.78, the average of 26 estimates compiled by Bloomberg.
The chain is spending more on marketing and traditional advertising, including a new campaign called Skillfully Made, to help maintain revenue growth that was the fastest among restaurant chains in the Standard & Poor’s 500 Index last year. Revenue is projected to increase 16 percent this year, slower than the 20 percent increase in 2012, according to data compiled by Bloomberg.
“The really good news here is that traffic accelerated,” Peter Saleh, a New York-based analyst at Telsey Advisory Group, said in an interview. “It was probably a lot of the advertising; it was probably the catering initiative.”
Chipotle rose 9.1 percent to $479.10 at 9:33 a.m. in New York, after jumping as much as 9.8 percent for the biggest intraday gain since April 19. The shares advanced 48 percent this year through yesterday, while the S&P 500 Restaurants Index added 18 percent.
Sales at Chipotle restaurants open at least 13 months rose 6.2 percent in the quarter. Analysts estimated a 4.7 percent gain, according to the average of 22 estimates from Consensus Metrix. In the fourth-quarter, same-store sales will be “similar or slightly better” than in the third quarter, Chief Financial Officer John Hartung said during a conference call with analysts yesterday.
Comparable-store sales will rise at a “mid-single-digit” percentage rate this year, Chipotle said. It previously estimated same-store sales growth at a “low to mid-single digit” rate.
Revenue climbed 18 percent to $826.9 million in the quarter. Analysts estimated $820.3 million, on average.
The company’s price-to-earnings ratio was about 44 at the close yesterday, the highest among North American restaurants, according to data compiled by Bloomberg. Chipotle has become more valuable to investors this year and trades at more than two and a half times the S&P 500’s price-to-earnings multiple.
The chain is spending more money on billboard and radio ads, Hartung said during a conference call in July. Chipotle’s marketing costs will be about 1.6 percent of sales for 2013, compared with 1.3 percent last year, he said.
Chipotle has recently introduced catering services and started selling tofu in some of its locations to attract new diners. The more-than-1,500-store burrito seller also has been evaluating changing its standards to allow some beef treated with antibiotics into its restaurants amid a supply shortage.
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