Chipotle Mexican Grill and its possible first stock split.
$CMG+2.1%, together with its subsidiaries, owns and operates a chain of restaurants under the Chipotle Mexican Grill brand in the United States, the United Kingdom, Canada, Germany and France. News has circulated that the company is considering its first-ever stock split (Split) and a straight 50 to 1.
If you're going to do something, do it big. This seems to be the thinking of the $CMG+2.1%board . Last week the board approved a 50:1 split . It's not a done deal yet. Shareholders must approve it at the annual meeting scheduled for June 6. Assuming they approve it, the Mexican restaurant chain will split its shares after the market closes on June 25. Chipotle noted in its press release last week, "This would be one of the largest stock splits in the history of the New York Stock Exchange (NYSE)."
Why is this now being considered for this company? First, the restaurant chain has never conducted a stock split in its 30 years of business. Second, and the main reason, however, is simply that Chipotle stock has skyrocketed over the years. The price has recently reached as high as $3,000 per share. That high stock price makes a 50-for-1 stock split practical.
Chipotle's motivation for splitting its stock is not surprising. Chief Financial and Administrative Officer Jack Hartung said: "We believe this will make our stock more accessible to employees and a broader range of investors."
Next, some positive summaries. Chipotle's business is booming. In Q4 2023, the company's revenue jumped 15.4% year-over-year to $2.5 billion. This growth wasn't just the result of Chipotle opening a record number of new restaurants. Same-store sales at existing restaurants rose 8.4%.
The company's adjusted earnings per share soared 25% higher in the fourth quarter. This performance was made possible in part by impressive improvement in operating margins at the corporate and restaurant levels.
Efforts to expand outside the U.S.. The company opened just its first restaurant in Calgary, Canada in 2023. It plans to open 10 to 14 new restaurants in Canada this year. Chipotle also signed its first international partnership in 2023, teaming up with Alshaya Group to open restaurants in the Middle East. But it still sees its primary growth opportunity in North America. CEO Brian Niccol said in the Q4 earnings report that he believes the company will be able to sustainably "to more than double our restaurants in North America." He also thinks Chipotle will be able to further increase its profit margins, which are at the top of the industry.
Certainly this is very interesting stuff, and tempting as well. On the one hand, is there a possibility that the price will still go up due to the split because it will make the price affordable to more potential buyers? On the other hand, we have to keep in mind that a stock split does not change anything about the fundamentals of the business or the prospects of the company. And even though the company has nowhere to grow, nowhere to expand, can it maintain strong growth? 📈 Your opinion of the company? 😊
Btw: ...the food looks very tempting on their menu though, too bad they're not in the Czech Republic. 🌮😃