In retreat after announcing a clarification to guidance for Q2, shares of restaurant company Chipotle Mexican Grill (CMG 426.90, -32.01) trade about 7.0% lower.
In a press release just ahead of last night’s close, CMG announced that it was meeting with a group of investors, and filed a report in connection with the meeting to reaffirm and clarify its guidance for certain financial and operating results for Q2 and FY17 as announced in the company’s quarterly earnings conference call on April 25, 2017.
Specifically, for Q2, the company continues to expect food costs to be about 34.2% of sales, and marketing and promotion costs to be up about 20 to 30 basis points sequentially to 3.6%-3.7% of sales. As a result, they expect other operating costs as a percentage of sales for Q2 to be at or slightly higher than reported for Q1.
For the full year, management continues to expect comparable restaurant sales increases in the high single digits, 195-210 new restaurant openings, and an estimated effective tax rate of about 39.0%.
This guidance was originally given on April 25, the time of the Q1 report. At the time, the company was well on its way to a recovery in traffic and average check while keeping promotional activity in check. The only point of change comes for costs, where CMG now sees marketing and promo costs up about 20-30 bps.
It will be interesting to see where CMG ends up after reporting Q2 earnings on July 25, as the company is coming off this outlook update as well as a disclosed data breach of the company’s payment processing. One thing is for sure, shares have entered into a decent pullback, perhaps scaring away some longs in the process. The stock is still up nicely though on a YTD basis, +12%, so there probably are still quite a few longs looking to take their bets into earnings next month.