Investing in Chipotle (NYSE:CMG)

Why Chipotle (NYSE:CMG) Can't Be Stopped

Written by Brian Hicks
Posted July 21, 2014

chipotleimageFollowing Q2 earnings today, Chipotle (NYSE:CMB) soared nearly 10 percent.

The company reported earnings per share of $110.3 million. That's a lot of burritos, and a big boost from Q2, 2013, which locked in at $87.9 million.

The folks over at Zachs note that the main driver behind the strong results were due to price increases introduced in early May for the first time in 3 years, writing. . .

All items saw price increases ranging between 5% and 9% for an approximately 6% increase net total. Moreover, management has not seen any significant pushback by customers since the implementation of higher prices. Therefore, this should positively impact the next several quarters as well.

This doesn't surprise me at all. After all, even with those price increases, you can still get a quality meal that few other fast food restaurants can offer – and without breaking the bank. As well, Chipotle continues to boast a much more loyal following compared to its competitors. This is thanks to the company's dedication to sustainability, business ethics and food quality.

Quality, Quality, Quality

Although the age of McDonalds and KFC has not gone gently into that good night, there continues to be a huge demand for higher quality “fast food.” In fact, according to a survey conducted by Consumer Reports, more and more Americans are demanding higher quality and more variety from their fast food restaurants.

As CNN reported earlier this month. . .

Consumer Reports asked subscribers to answer one straightforward question: "On a scale of  1 to 10, from least delicious to most delicious you’ve ever eaten, how would you rate the taste?"

96,208 meals and 65 chains later, some trends emerged: readers expressed an increased interest in the quality of the food, and less of a focus on convenience than they had in the group's 2011 report. One industry expert, Darren Tristano of Technomic, a food-service research and consulting firm, told Consumer Reports that he believes the shift has a lot to do with the increasing role food plays in millennials' social lives.

He also noted that chains like Chipotle and Panera emphasize the origin and quality of their ingredients, unlike major chains like McDonald's, which serves flash-frozen patties touted as "free from preservatives, fillers, extenders, and so-called pink slime.”

"More and more, food quality ― not just low price ― is emerging as a deciding-factor for many Americans when choosing where to spend their dining dollars," said Tod Marks, senior projects editor for Consumer Reports in a press release about the survey.

He continued, “Strong regional players and slightly more upscale fast-casual chains like Chipotle are giving the heavy-hitters in the fast-food business a wake-up call. And our survey clearly shows the big guys need to respond.”

Nice Gain!

Although not included in the Consumer Reports survey, another reason consumers are flocking to Chipotle is because the company actually makes legitimate efforts to boost its environmental credibility.

From supporting green building practices at its retail locations to sourcing local, often sustainably-produced food, those who do actually care where their food comes from tend to gravitate to Chipotle, assuming there's one nearby.

I know I do.

Look, any fast food joint can make a burrito, but few can actually make it taste good, and do so both responsibly and competitively.

And here's the bonus. . .

If you were smart enough to pick up some shares at any time since it first went public, you're sitting on a very nice gain.

Check it out. . .