Published on March 11th, 2015 | by Daily Station Team

Chipotle Mexican Grill, Inc. (NYSE:CMG) posts a disappointing fourth quarter

 

Chipotle’s

Investors and the market itself have been left unimpressed by Chipotle Mexican Grill, Inc. (NYSE:CMG)’s fourth quarter results. Investors immediately showed their displeasure with the company’s performance when Chipotle Mexican Grill, Inc. (NYSE:CMG) failed to meet the market’s expectations. The stock dropped by 6.42 percent after the results came out. Revenues went up by 27 percent on the year to year basis. Yet, the company fell short of market expectations and as soon as the results came out, investors started dumping the stock because of fear of a future loss.

The CEO of the company blamed the fall on changing trends in the market and the fact that other fast food joints are imitating the company’s strategies. The CEO of Chipotle Mexican Grill, Inc. (NYSE:CMG) also stated that the customers are unable to differentiate between good and bad service. Adjusted earnings per share went up by 52 percent to 3.84 from 2.53 dollars. The gross margin decreased because of the soaring food cost, which was due to the increase in the menu prices in the first place. Food costs made up for 35 percent off of the revenue.

Now Chipotle Mexican Grill, Inc. (NYSE:CMG) is in a position where it has to make sure the investors don’t dump the stock any further. The company’s performance in the fourth quarter wasn’t bad but it wasn’t satisfactory either, or at least not so much to impress the investors or to keep them investing in the company. Chipotle Mexican Grill, Inc. (NYSE:CMG) also spent millions in opening new restaurants, total 192 in number in 2014 which also affected the company’s finances.

Chipotle Mexican Grill, Inc. (NYSE:CMG) should have aimed for formidability. The expansion has cost the company its finances and its investors. Now the company will find it hard to gain the investor’s trust. What Chipotle Mexican Grill, Inc. (NYSE:CMG) can do now is that it can produce extraordinary profits in the coming quarter to compensate the investors’ loss. Or it can lure new investors from the market by offering small dividends or incentives in the form of cash, just so to keep them happy for the time being.

Chipotle Mexican Grill, Inc. (NYSE:CMG) is trading in its all time high price on the market. It should make sure that the 6 percent drop is compensated and that the price doesn’t drop further. In fact, Chipotle Mexican Grill, Inc. (NYSE:CMG) should aim to push the stock price higher in order to attract the attention of the investors on the market.

The company has been aiming to open 200 more restaurants; we suggest that it should put this idea on hiatus and figure out ways to bring investors back and keep the current ones happy because you never know when they start shorting the stock behind their back. Investors aren’t known for their financial courage and Chipotle Mexican Grill, Inc. (NYSE:CMG) can never rely upon the investor’s trust, especially in a financially waning situation. It’s time Chipotle Mexican Grill, Inc. (NYSE:CMG) puts its expansion plans on ice and starts remedying its financial situation by posting good quarters and luring investors.

 


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