Core Insights - Chipotle Mexican Grill reported its first same-store sales decline since 2020, with a 0.4% drop in comparable-restaurant sales, attributed to weakening consumer traffic and economic concerns [3][8][4] - The company anticipates same-store sales growth in the low single digits for 2025, slightly lower than previous forecasts, with expectations for traffic to turn positive in the second half of the year [6][5] - Despite challenges, Chipotle continues to grow revenue, reporting a 6% increase to $2.88 billion, and adjusted earnings per share (EPS) rose 7% to $0.29, surpassing analyst expectations [8][11] Consumer Traffic and Economic Concerns - Chipotle experienced a 2% sales decline in January, with management attributing this to severe weather, wildfires, and an unfavorable calendar shift [3] - In February, the company noted a reduction in customer visits due to economic uncertainty, which has persisted into April [4] Financial Performance - Revenue grew by 6% to $2.88 billion, while adjusted EPS increased by 7% to $0.29, exceeding the analyst consensus of $0.28 [8] - Comparable-restaurant sales fell 0.4%, below the expected 1.7% increase, with transactions down 2.3% and average check rising by 1.9% [8] Operating Margins and Costs - Restaurant-level operating margins decreased by 130 basis points to 26.2%, impacted by larger portion sizes and rising food and labor costs [9] - Chipotle expects ongoing tariff impacts of about 50 basis points, excluding postponed tariffs on Mexico and Canada [9] Growth Opportunities - The company plans to add new locations at an annual rate of 8% to 10% in the U.S. and is exploring international expansion opportunities in Canada, the U.K., Germany, and the Middle East [12] - Chipotle has signed an agreement with Alsea to open restaurants in Mexico, with the first location scheduled for early next year [12] Valuation and Investment Perspective - The stock trades at a forward price-to-earnings (P/E) multiple of about 39 based on 2025 estimates, which is at the low end of its historical range [13] - Despite current challenges, the long-term growth story for Chipotle remains intact, suggesting potential for investors to accumulate shares [13]

Core Viewpoint - Chipotle Mexican Grill is facing challenges in Q2 2025 due to a post-stock split letdown, CEO transition, global macroeconomic issues, and a sluggish outlook, but maintains a strong leadership position and growth potential [1][2][8] Group 1: Financial Performance - Chipotle reported Q1 revenue of $2.9 billion, slightly below analysts' expectations, with growth driven by new store openings [4] - The company added 57 new stores in Q1, representing an 8.7% increase year-over-year, although comparable store sales declined by 0.4% due to lower transaction volume [4] - Average check increased by nearly 2%, indicating that while customer visits may be less frequent, spending per visit is higher [5] Group 2: Cost and Margin Analysis - Restaurant-level operating margin contracted by 130 basis points due to rising food and labor costs, but this was offset by reduced selling, general, and administrative (SG&A) expenses [6] - SG&A savings helped maintain adjusted net earnings growth of 7.4% despite increased restaurant costs [7] Group 3: Future Outlook - Chipotle forecasts low single-digit growth in comparable store sales for 2025, with a high single-digit increase in store count, suggesting overall revenue and earnings growth in the low double digits by year-end [8] - The company is nearing completion of its share repurchase authorization but plans to increase it soon, supported by strong cash flow [10] - Analysts have lowered price targets for Chipotle stock, but the current market price is near a critical support level, indicating potential for a rebound [11][12] Group 4: International Expansion - Chipotle is accelerating its international expansion, having opened two licensed stores in the latest quarter and planning to enter the Mexican market by early 2026 [3] - Management views Mexico as a favorable market due to the alignment of its ingredients and cooking style with local preferences [3]

Core Viewpoint - Chipotle Mexican Grill reported adjusted earnings per share of $0.29 for Q1, exceeding Wall Street estimates, but its revenue of $2.9 billion fell short of expectations [1] Financial Performance - The company experienced a same-store sales decline of 0.4% in Q1, marking its first year-over-year drop since Q2 2020, contrasting with a 7% gain in Q1 2024 [4] - Revenue rose by 102% and net income surged by 338% from 2019 to 2024, showcasing a strong long-term financial performance [8] Market Conditions - U.S. consumer sentiment is low, with the University of Michigan Consumer Sentiment Index at its second lowest level on record, impacting discretionary spending [2][3] - The company’s outlook anticipates same-store sales to increase in the low single-digit range for the full year [5] Strategic Positioning - Chipotle maintains a value proposition with an average cost of below $10 for its chicken burritos and burrito bowls, which is 20% to 30% below comparable fast-casual meals [6][7] - The company aims to expand its physical footprint, with plans to open about 273 new locations by the end of the year, bringing its total to 3,781 [9] Future Growth Potential - Management is confident in reaching a long-term target of 7,000 stores in North America and aims for an annual revenue of $28 billion [10] - The stock, currently trading 28% off its peak, presents an opportunity for long-term investment despite a forward P/E ratio of 39 [12]

Core Viewpoint - Consumer companies are reducing their forecasts due to the impact of tariffs on profits and a decline in consumer spending, with at least a dozen companies adjusting their full-year outlooks during the current earnings season [1][2][12]. Impact of Tariffs - Tariffs are leading to increased prices on essential commodities, which negatively affects earnings, and the uncertainty from the trade war is causing consumers to reduce spending [2][11]. - Current tariffs include a 10% duty on most imports, with Chinese goods facing a 145% duty, impacting various sectors including aviation and consumer goods [3][5]. Company Responses - Companies like Procter & Gamble, Keurig Dr Pepper, and Hasbro are considering price increases to offset higher costs due to tariffs [7][14]. - American Airlines has pulled its financial guidance for 2025, citing the unpredictable U.S. economy and the negative impact of tariffs on demand [6][17]. Consumer Sentiment - U.S. consumer sentiment has dropped to its second-lowest level since 1952, leading to reduced spending as consumers fear inflation and potential recession [10][11]. - Chipotle has reported a slowdown in customer traffic, attributing it to financial concerns among diners, which has led to a reduction in their sales growth outlook [14]. Sector-Specific Insights - The airline industry is experiencing weaker demand, particularly in economy cabins, with executives expressing concerns over the tariff policies affecting travel [16][17]. - Hasbro has reiterated its forecast, anticipating a significant headwind from tariffs, while also warning of potential job losses due to increased costs [15].

Financial Data and Key Metrics Changes - Sales grew over 6% to reach $2.9 billion, including a comparable sales decline of 0.4% [8][44] - Digital sales represented 35.4% of total sales [8] - Restaurant-level margin was 26.2%, a decrease of 130 basis points year over year [8][44] - Adjusted diluted earnings per share was $0.29, representing 7% growth over last year [8][44] - Cost of sales increased to 29.2%, up about 40 basis points from last year [47] - Labor costs for the quarter were 25%, an increase of about 60 basis points from last year [51] Business Line Data and Key Metrics Changes - The company opened 57 new restaurants, including 48 Chipotle lanes [8] - The average cost of a popular entree is still under $10, which is about 20% to 30% below comparable fast-casual meals [15] - New restaurant economics remain strong, with year two cash-on-cash returns around 60% [38] Market Data and Key Metrics Changes - The company is facing a slowdown in consumer spending, impacting transaction trends [10][11] - Current underlying trends would result in a low single-digit full-year comparable sales growth [12] Company Strategy and Development Direction - The company focuses on five key strategies: successful restaurant operations, technology and innovation, brand visibility, people leadership, and expanding access through new restaurant openings [12][13] - The company aims to expand to 7,000 restaurants in the US and Canada [37][42] - Marketing plans will ramp up in the summer to enhance visibility and relevance [30] Management's Comments on Operating Environment and Future Outlook - Management noted that elevated consumer uncertainty is impacting spending habits, leading to a slowdown in transaction trends [10][11] - The company remains optimistic about returning to positive transaction growth in the second half of the year [12][46] - Management emphasized the strength of the Chipotle brand and its value proposition [11][63] Other Important Information - The company has a strong balance sheet with $2.1 billion in cash and no debt [55] - The board authorized an additional $400 million for share repurchase [55] Q&A Session Summary Question: How does the company view competition in the fast-casual space? - Management expressed confidence that competition does not materially impact their business, often seeing increased traffic in areas with new competitors [62][63] Question: What is the impact of tariffs on new store CapEx? - Management indicated that tariffs could lead to a mid-single-digit increase in new store build costs, but the impact appears minimal at this point [66][68] Question: What are the underlying factors for the slowdown in consumer spending? - Management attributed the slowdown to economic uncertainty and consumers eating at home more frequently, rather than issues specific to Chipotle [73][74] Question: How does the company plan to address digital sales performance? - Management acknowledged the need for improvement in digital sales and is working on removing friction points in the app to enhance customer experience [113][114] Question: What initiatives are in place to drive positive transaction comps? - Management highlighted the importance of operational efficiency, marketing initiatives, and digital enhancements to drive positive transaction growth in the second half of the year [134]

Part I - Financial Information [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20FINANCIAL%20STATEMENTS) For the first quarter ended March 31, 2025, Chipotle reported total revenue of **$2.88 billion**, a **6.4% increase** year-over-year, and net income of **$386.6 million**, up from **$359.3 million** in the prior-year period. Total assets decreased slightly to **$9.04 billion**. The financial statements also reflect a **50-for-1 stock split** effected in June 2024, with all share and per-share data retroactively adjusted - On June 26, 2024, the company executed a **50-for-1 stock split**. All share and per-share information in this report has been retroactively adjusted to reflect this split[17](index=17&type=chunk) [Condensed Consolidated Balance Sheets](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Balance Sheet Summary (as of March 31, 2025 vs. December 31, 2024) | Balance Sheet Item | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | $1,661,648 | $1,780,587 | | **Total Assets** | $9,044,094 | $9,204,374 | | **Total Current Liabilities** | $1,091,538 | $1,168,768 | | **Total Liabilities** | $5,553,222 | $5,548,828 | | **Total Shareholders' Equity** | $3,490,872 | $3,655,546 | [Condensed Consolidated Statements of Income](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20INCOME%20AND%20COMPREHENSIVE%20INCOME) Income Statement Summary (Three months ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | **Total Revenue** | $2,875,253 | $2,701,848 | +6.4% | | **Income from Operations** | $479,250 | $441,292 | +8.6% | | **Net Income** | $386,599 | $359,287 | +7.6% | | **Diluted EPS** | $0.28 | $0.26 | +7.7% | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Cash Flow Summary (Three months ended March 31) | Cash Flow Activity | 2025 (in thousands) | 2024 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $557,075 | $569,234 | | Net cash provided by/(used in) investing activities | $6,079 | ($301,039) | | Net cash used in financing activities | ($585,174) | ($100,074) | - Cash used in financing activities increased significantly, driven by a large increase in common stock repurchases to **$553.8 million** in Q1 2025 from **$27.0 million** in Q1 2024[14](index=14&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=NOTES%20TO%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) - As of March 31, 2025, the company operated **3,781 restaurants**, including **3,697** in the U.S. and **84** internationally, plus **five** licensed locations[16](index=16&type=chunk) - During Q1 2025, the company repurchased **$553.7 million** of its common stock. As of March 31, 2025, **$874.7 million** remained authorized for future repurchases, which includes a new **$400 million** authorization approved in March 2025[34](index=34&type=chunk) - The company is facing a shareholder class action lawsuit alleging that statements regarding portion sizes were materially false and misleading. The accrued legal liability for various matters was **$21.2 million** as of March 31, 2025[46](index=46&type=chunk)[49](index=49&type=chunk) [Management's Discussion and Analysis (MD&A)](index=16&type=section&id=Item%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management reported a **6.4% increase** in total revenue to **$2.9 billion**, primarily driven by new restaurant openings. However, comparable restaurant sales decreased by **0.4%** due to a **2.3% decline** in transaction volume, which management attributes to a slowdown in consumer spending and inclement weather. Operating costs as a percentage of revenue rose due to inflation and wage increases, though G&A expenses declined. The company plans to open **315-345 new restaurants** in 2025, with a strong focus on Chipotlane locations. Liquidity remains strong with **$2.0 billion** in cash and investments [Operating Results and Sales Trends](index=17&type=section&id=Results%20of%20Operations) Q1 2025 Key Performance Metrics (vs. Q1 2024) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total Revenue | $2.9 billion (+6.4%) | $2.7 billion | | Comparable Restaurant Sales | -0.4% | +7.0% | | Transactions | -2.3% | +5.4% | | Average Check | +1.9% | +1.6% | | Diluted EPS | $0.28 (+7.7%) | $0.26 | - The decrease in comparable restaurant sales was attributed to a **2.3% decline** in transactions, reflecting a slowdown in consumer spending and periods of inclement weather[60](index=60&type=chunk) - Digital sales represented **35.4%** of total food and beverage revenue for the quarter[60](index=60&type=chunk) [Restaurant Development](index=17&type=section&id=Restaurant%20Development) - Opened **57 new restaurants** in Q1 2025, of which **48 (84%)** included a Chipotlane[61](index=61&type=chunk) - The company expects to open approximately **315 to 345** company-owned restaurants in 2025, with at least **80%** featuring a Chipotlane[61](index=61&type=chunk) - Two licensed restaurants were opened in the Middle East during the quarter, bringing the total to **five**[61](index=61&type=chunk)[64](index=64&type=chunk) [Cost Analysis](index=18&type=section&id=Cost%20Analysis) Operating Costs as a Percentage of Total Revenue (Q1 2025 vs Q1 2024) | Cost Category | Q1 2025 | Q1 2024 | Change (basis points) | | :--- | :--- | :--- | :--- | | Food, beverage and packaging | 29.2% | 28.8% | +40 bps | | Labor | 25.0% | 24.4% | +60 bps | | Occupancy | 5.2% | 5.0% | +20 bps | | General and administrative | 6.0% | 7.6% | -160 bps | - Food costs increased due to inflation and higher usage of avocados, dairy, and chicken[67](index=67&type=chunk) - Labor costs rose due to restaurant wage inflation, including minimum wage increases in California[69](index=69&type=chunk) - General and administrative expenses decreased by **$31.8 million**, primarily due to the absence of the biennial All Managers' Conference held in Q1 2024 and lower legal contingency costs[73](index=73&type=chunk) [Liquidity and Capital Resources](index=21&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2025, the company had a cash and marketable investments balance of **$2.0 billion**[77](index=77&type=chunk) - Primary uses of cash flow are capital for new restaurant construction and share repurchases[77](index=77&type=chunk) - The company has a **$500 million** undrawn revolving credit facility[78](index=78&type=chunk) [Market Risk Disclosures](index=22&type=section&id=Item%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURE%20ABOUT%20MARKET%20RISK) The company identifies its primary market risks as commodity price volatility, interest rate fluctuations, and foreign currency exchange. Commodity risks for ingredients and materials are managed through various supplier pricing agreements. Interest rate risk exists on its **$2.1 billion** of cash and investments. Foreign currency risk is considered not material due to the predominance of U.S. operations - The company is exposed to commodity price risks for food, packaging, and construction materials, which it attempts to mitigate through a mix of fixed and formula-based pricing protocols with suppliers[85](index=85&type=chunk) - Interest rate risk exposure comes from its **$2.1 billion** in cash, cash equivalents, and investments[86](index=86&type=chunk) [Controls and Procedures](index=22&type=section&id=Item%204.%20CONTROLS%20AND%20PROCEDURES) Based on an evaluation conducted by management, including the CEO and CFO, the company's disclosure controls and procedures were deemed effective as of March 31, 2025. There were no material changes to internal controls over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[89](index=89&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[90](index=90&type=chunk) Part II - Other Information [Legal Proceedings](index=22&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS) For information regarding legal proceedings, the company refers readers to Note 11, "Commitments and Contingencies," within the condensed consolidated financial statements - Information on legal proceedings is detailed in Note 11 of the financial statements[92](index=92&type=chunk) [Stock Repurchases](index=23&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) During the first quarter of 2025, Chipotle repurchased **10,224,763 shares** of its common stock for a total of approximately **$553.7 million**, at an average price of **$54.15 per share**. The board approved an additional **$400 million** for repurchases in March 2025 Share Repurchases in Q1 2025 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | January 2025 | 3,430,595 | $57.71 | | February 2025 | 3,019,040 | $55.10 | | March 2025 | 3,775,128 | $50.16 | | **Total Q1** | **10,224,763** | **$54.15** | - The total available for future repurchases as of March 31, 2025, was **$874.7 million**, which includes a new **$400 million** authorization approved by the Board on March 27, 2025[96](index=96&type=chunk)

Core Insights - LivePerson has been recognized as a Leader in multiple categories by G2, including AI Agents, Chatbots, Conversational Marketing, Bot Platforms, Live Chat, and Customer Self-Service, based on real customer reviews [1][2][3] Company Overview - LivePerson (NASDAQ: LPSN) is a prominent provider of enterprise conversational AI and digital transformation solutions, serving major brands like HSBC, Chipotle, and Virgin Media [5] - The company facilitates nearly a billion conversational interactions monthly, leveraging rich data analytics and safety tools to enhance business outcomes [5] Recognition and Achievements - The Leader designation from G2 is awarded to vendors that consistently receive high ratings from users and demonstrate significant market presence [2] - LivePerson's CEO, John Sabino, expressed pride in the recognition, highlighting the company's commitment to delivering connected and personalized experiences [3] Product Offerings - LivePerson's solutions include AI Agents, Chatbots, Conversational Marketing, Bot Platforms, Live Chat, and Customer Self-Service, which enable businesses to engage with customers in a human-like manner [7]