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Can Chipotle's Equipment Upgrades Fix Peak-Hour Bottlenecks?
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Key Takeaways
Chipotle is piloting new kitchen equipment to boost speed, consistency and customer satisfaction.
CMG plans to complete the rollout in more than 100 restaurants by 2025, with full deployment over three years.
New equipment may support catering growth and offset softer Q2 comps and margins over time.
Chipotle Mexican Grill, Inc. (CMG - Free Report) is actively investing in enhancing its sales performance across all its restaurants, targeted mainly during peak hours or peak period of the season, ensuring efficiency. One of the innovative investments includes the rollout of a high-efficiency equipment package, containing a dual-sided plancha, a three-pan rice cooker and a high-capacity fryer. The primary aim of rolling out this new equipment package is to improve the culinary aspect through quality and consistency, alongside increasing preparation and throughput efficiency. It is expected that the full rollout of the new equipment package is expected to scale revenue visibility and increase customer satisfaction.
Chipotle plans on following a phased stage-gate approach regarding the equipment package rollout and expects to complete the process in at least 100 of its restaurants by the end of 2025. The company believes that the acceleration of this process by the end of 2025 will provide it an estimated time of three years to wrap up the rollout across all existing restaurants.
Moreover, the positive impact of this new strategy is expected to benefit its other opted businesses like catering, especially in the subregions, where CMG expects a debut catering test in fall 2025. Benefits realized upon the rolling out of the high-efficiency equipment package will open new doors for the company to explore aligning with its entire business operations, positioning it well for long-term growth.
Even if in the near term the comps (down 4% in the second quarter of 2025) and operating margins (down 150 basis points in the second quarter of 2025) are on the softer side, in the long term, the numbers are expected to look favorable comparatively, indicating an increasing trend.
CMG Stock’s Price Performance vs. Other Market Players
Shares of this operator of quick-casual and fresh Mexican food restaurant chains have trended down 14.6% in the past three months, underperforming the Zacks Retail - Restaurants industry, the broader Zacks Retail-Wholesale sector and the S&P 500 index.
Image Source: Zacks Investment Research
Moreover, restaurants like CAVA Group, Inc. (CAVA - Free Report) and Sweetgreen, Inc. (SG - Free Report) , offer substantial competition to Chipotle across store economics, menu style and technological innovation factors. In the past three months, shares of CAVA and Sweetgreen have tumbled 7.1% and 38.4%, respectively. Although ongoing inflationary pressures, especially from labor and macro uncertainties regarding commodity price fluctuations, are hurting these casual dining places, in the long term, the majority of the headwinds are expected to start normalizing, boding well for profitability.
Chipotle’s Valuation Trend
Chipotle stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-sales (P/S) ratio of 4.38, as evidenced by the chart below. The overvaluation of the stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up.
Image Source: Zacks Investment Research
Notably, CAVA and Sweetgreen are currently trading at a forward 12-month P/S ratio of 7.63 and 1.8, respectively.
EPS Trend of CMG
For 2025 and 2026, CMG’s earnings estimates have remained unchanged over the past 60 days at $1.21 and $1.42 per share, respectively. However, the estimated figures reflect 8% and 17.4% year-over-year growth, respectively.
Image: Shutterstock
Can Chipotle's Equipment Upgrades Fix Peak-Hour Bottlenecks?
Key Takeaways
Chipotle Mexican Grill, Inc. (CMG - Free Report) is actively investing in enhancing its sales performance across all its restaurants, targeted mainly during peak hours or peak period of the season, ensuring efficiency. One of the innovative investments includes the rollout of a high-efficiency equipment package, containing a dual-sided plancha, a three-pan rice cooker and a high-capacity fryer. The primary aim of rolling out this new equipment package is to improve the culinary aspect through quality and consistency, alongside increasing preparation and throughput efficiency. It is expected that the full rollout of the new equipment package is expected to scale revenue visibility and increase customer satisfaction.
Chipotle plans on following a phased stage-gate approach regarding the equipment package rollout and expects to complete the process in at least 100 of its restaurants by the end of 2025. The company believes that the acceleration of this process by the end of 2025 will provide it an estimated time of three years to wrap up the rollout across all existing restaurants.
Moreover, the positive impact of this new strategy is expected to benefit its other opted businesses like catering, especially in the subregions, where CMG expects a debut catering test in fall 2025. Benefits realized upon the rolling out of the high-efficiency equipment package will open new doors for the company to explore aligning with its entire business operations, positioning it well for long-term growth.
Even if in the near term the comps (down 4% in the second quarter of 2025) and operating margins (down 150 basis points in the second quarter of 2025) are on the softer side, in the long term, the numbers are expected to look favorable comparatively, indicating an increasing trend.
CMG Stock’s Price Performance vs. Other Market Players
Shares of this operator of quick-casual and fresh Mexican food restaurant chains have trended down 14.6% in the past three months, underperforming the Zacks Retail - Restaurants industry, the broader Zacks Retail-Wholesale sector and the S&P 500 index.
Image Source: Zacks Investment Research
Moreover, restaurants like CAVA Group, Inc. (CAVA - Free Report) and Sweetgreen, Inc. (SG - Free Report) , offer substantial competition to Chipotle across store economics, menu style and technological innovation factors. In the past three months, shares of CAVA and Sweetgreen have tumbled 7.1% and 38.4%, respectively. Although ongoing inflationary pressures, especially from labor and macro uncertainties regarding commodity price fluctuations, are hurting these casual dining places, in the long term, the majority of the headwinds are expected to start normalizing, boding well for profitability.
Chipotle’s Valuation Trend
Chipotle stock is currently trading at a premium compared with the industry peers, with a forward 12-month price-to-sales (P/S) ratio of 4.38, as evidenced by the chart below. The overvaluation of the stock compared with its industry peers indicates its strong potential in the market, given the favorable trends backing it up.
Image Source: Zacks Investment Research
Notably, CAVA and Sweetgreen are currently trading at a forward 12-month P/S ratio of 7.63 and 1.8, respectively.
EPS Trend of CMG
For 2025 and 2026, CMG’s earnings estimates have remained unchanged over the past 60 days at $1.21 and $1.42 per share, respectively. However, the estimated figures reflect 8% and 17.4% year-over-year growth, respectively.
Image Source: Zacks Investment Research
The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.