What happened

Shares of Chipotle Mexican Grill (NYSE: CMG) jumped 10% on Wednesday after the burrito chain’s fourth-quarter earnings beat Wall Street expectations.

So what

Chipotles income grew 22% year over year to $2 billion. The gains were fueled by new store openings and a 15.2% increase in same-restaurant sales.

Image source: Getty Images.

Additionally, Chipotle was able to offset rising food and labor costs with increases in menu prices. This helped restaurant-level and company-wide operating margins improve to 20.2% and 8.1%, respectively, from 19.5% and 7.3% in the quarter. of the previous year.

“We’re pretty lucky with the pricing power we have,” CEO Brian Niccol said in an interview with CNBC.

In total, Chipotle’s adjusted net income jumped 60% to $159 million, or $5.58 per share. That was well above analysts’ consensus estimate, which called for earnings per share of $5.25.

Now what

Management warned that same-store sales growth could slow in the first quarter, in part due to an increase in the number of coronavirus cases linked to the omicron variant. Thus, investors should expect earnings growth in the “mid to high single digit range”.

Still, Chipotle intends to accelerate its store opening strategy in the coming years. Thanks to the strong performance of restaurants in small towns, the company now sees an opportunity to expand its business to at least 7,000 locations in North America, up from 6,000 previously.

To achieve this goal, Chipotle plans to grow its restaurant base by 8% to 10% per year, with up to 250 openings in 2022.

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Joe Tenebruso has no position in the stocks mentioned. The Motley Fool owns and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

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