CHIPOTLE MEXICAN GRILL INC (CMG)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Note Regarding Forward-Looking Statements

Certain statements in this report are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995, including statements about the number of new restaurants we expect to open in 2026, and the number with Chipotlanes, the number of new international partner-operated restaurants we expect to open, our anticipated comparable restaurant sales for 2026, the expected impact of tariffs on our food, beverage and packaging costs during the 2026 third quarter and on an ongoing basis, our expectation to generate positive cash flow for the foreseeable future, our expectations for utilization of cash flow from operations, our ability to manage prices, risks and volatility in our supply chain, our plans for continuing stock buybacks and the volume of buybacks, and the period of time during which our cash and short-term investment will fund our operations. We use words such as “anticipate,” “believe,” “could,” “should,” “may,” “approximately,” “estimate,” “expect,” “intend,” “project,” “target,” "goal," and similar terms and phrases, including references to assumptions, to identify forward-looking statements. The forward-looking statements in this report are based on currently available operating, financial, and competitive information available to us as of the date of this filing and speak only as of the date they are made. We assume no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements, including but not limited to: wage inflation and state or local regulations mandating higher minimum wages; the competitive labor market, which impacts our ability to attract and retain qualified employees; the impact of any union organizing efforts and our responses to such efforts; increases in ingredient and other operating costs due to inflation, global conflicts, severe weather, our Food with Integrity philosophy, tariffs, or trade restrictions; intermittent supply shortages relating to our Food with Integrity philosophy, rapid expansion, limited time offerings, and supply chain disruptions; risks and impacts of food safety incidents and food-borne illnesses; our reliance on certain information technology systems and potential material failures, interruptions, or outages; risks that our investments in new technology and technological innovations may not generate returns; privacy and cybersecurity risks, including breaches, unauthorized access, theft, modification, destruction, or ransom of guest or employee personal or confidential information stored on our network or the network of third party providers; the impact of competition, including from sources outside the restaurant industry; the impact of government laws and regulations relating to our employees, employment practices, restaurant design and construction, and the sale of food or alcoholic beverages; our ability to achieve our planned growth, such as the costs and availability of suitable new restaurant sites, construction materials, and contractors and restaurant equipment; the expected costs and risks related to our international expansion, including through partner-operated restaurants in the Middle East, Asia, and Mexico; our ability to achieve expected levels of comparable restaurant sales due to factors such as changes in guests' perceptions of our brand, including as a result of negative publicity or social media posts and decreased consumer spending or restaurant visits, or the inability to increase menu prices or realize the benefits of menu price increases; failure to meet market expectations for our financial performance or any announced guidance and the impact thereof; the potential impact of activist shareholder actions or tactics; failure to attract or retain key executive talent; the impact of our brand, marketing, promotional, advertising, and pricing strategies, digital platform and menu innovations; our reliance on third party delivery services and the information technology infrastructure; and enforcement and litigation risks, including possible governmental actions and potential litigation related to food safety incidents, cybersecurity incidents, employment or privacy laws, advertising claims, contract disputes, or other matters. In addition, many of the foregoing risks and uncertainties are, or could be, exacerbated by any worsening of the global business and macroeconomic environment. These statements also are subject to other risk factors described from time to time in our SEC reports, including our annual report on Form 10-K and quarterly reports on Form 10-Q, all of which are available on the investor relations page of our website at ir.Chipotle.com.

As of June 30, 2026, we owned 4,074 Chipotle restaurants throughout the United States and 112 international Chipotle restaurants. Additionally, we had 15 international partner-operated restaurants. We manage our U.S. operations based on 12 regions and aggregate our operations to one reportable segment.

Throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” we discuss the following key operating metrics which we believe will drive our financial results and long-term growth model. We believe these metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies:

•Comparable restaurant sales

•Food, beverage, and packaging as a percentage of total revenue

•Labor as a percentage of total revenue

•Occupancy as a percentage of total revenue

•Other operating costs as a percentage of total revenue

•New restaurant openings

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Second Quarter 2026 Financial Highlights, year-over-year:

•Total revenue increased 9.3% to $3.3 billion

•Comparable restaurant sales increased 2.2%

•Diluted earnings per share remained flat at $0.32

Sales Trends. Comparable restaurant sales increased 2.2% for the three months ended June 30, 2026. The increase is attributable to a 1.2% increase in average check and a 1.0% increase in transactions. Comparable restaurant sales represent the change in period-over-period total revenue for company-owned restaurants in operation for at least 13 full calendar months. Digital sales represented 38.3% of total food and beverage revenue for the three months ended June 30, 2026, an increase from 35.5% for the three months ended June 30, 2025.

We believe these results reflect the success of our Recipe for Growth strategy (as discussed in our Annual Report on Form 10-K for the fiscal year ending December 31, 2025) and related initiatives against the dynamic consumer environment that has persisted in 2026. We have recently experienced low-single-digit headwinds to our comparable restaurant sales trends that we believe are tied to that environment as customers respond to, among other things, recent U.S. food safety concerns and geopolitical developments. While our outlook remains positive, our financial results could be materially adversely impacted if these disruptions or trends worsen throughout the third quarter of 2026 or beyond.

Restaurant Development. During the three months ended June 30, 2026, we opened 100 company-owned restaurants, which included 80 restaurants with a Chipotlane. We also opened one international partner-operated restaurant.

Restaurant Activity

The following table details company-owned restaurant unit data for the periods indicated.

The following table details partner-operated restaurant unit data for the periods indicated.

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Results of Operations

Our results of operations as a percentage of total revenue and period-over-period changes are discussed in the following section.

Revenue

(1)Average restaurant sales refers to the average trailing 12-month food and beverage revenue for company-owned restaurants in operation for at least 12 full calendar months.

The following is a summary of the change in restaurant sales for the period indicated:

Food, Beverage and Packaging Costs

Food, beverage and packaging costs increased 0.8% as a percentage of total revenue for the three months ended June 30, 2026 compared to the three months ended June 30, 2025. The increase was driven by 1.4% of inflation, primarily from beef and freight, and 0.5% of higher protein and produce usage. These increases were partially offset by a 0.5% benefit from menu price increases and 0.5% of lower avocado and dairy costs.

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Food, beverage and packaging costs increased 0.6% as a percentage of total revenue for the six months ended June 30, 2026 compared to th

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion together with our consolidated financial statements and related notes included in Item 8. “Financial Statements and Supplementary Data.” This section of the Form 10-K generally discusses 2025 items and year-to-year comparisons of 2025 to 2024. Discussions of 2023 items and year-to-year comparisons of 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual Report on Form 10-K for the year ended December 31, 2024. The discussion contains forward-looking statements involving risks, uncertainties and assumptions that could cause our results to differ materially from expectations. See “Cautionary Note Regarding Forward-Looking Statements.” Factors that might cause such differences include those described in Item 1A. “Risk Factors”, 7A. "Quantitative and Qualitative Disclosure About Market Risk", and elsewhere in this report.

Overview

As of December 31, 2025, we owned 3,938 Chipotle restaurants throughout the United States, and 104 international Chipotle restaurants. Additionally, we had 14 international partner-operated restaurants. We manage our U.S. operations based on 11 regions and aggregate our operations to one reportable segment.

Throughout “Management’s Discussion and Analysis of Financial Condition and Results of Operations” we discuss the following key operating metrics which we believe will drive our financial results and long-term growth model. We believe these metrics are useful to investors because management uses these metrics to assess the growth of our business and the effectiveness of our marketing and operational strategies:

•Comparable restaurant sales

•Food, beverage, and packaging as a percentage of total revenue

•Labor as a percentage of total revenue

•Occupancy as a percentage of total revenue

•Other operating costs as a percentage of total revenue

•New restaurant openings

2025 Financial Highlights, year-over-year:

•Total revenue increased 5.4% to $11.9 billion

•Comparable restaurant sales decreased 1.7%

•Diluted earnings per share was $1.14, a 2.7% increase from $1.11

Sales Trends. Comparable restaurant sales decreased 1.7% for the year ended December 31, 2025. The decrease is attributable to lower transactions of 2.9%, partially offset by a 1.2% increase in average check. Comparable restaurant sales represent the change in period-over-period total revenue for company-owned restaurants in operation for at least 13 full calendar months. Digital sales represented 36.7% of total food and beverage revenue. For 2026, management is anticipating comparable restaurant sales to be about flat.

Restaurant Development. During the year ended December 31, 2025, we opened 334 company-owned restaurants, which included 257 restaurants with a Chipotlane. We expect to open approximately 350 to 370 restaurants in 2026, which includes 10 to 15 international partner-operated restaurants. We expect around 80% of our new company-owned restaurants will include a Chipotlane.

Partner-Operated Restaurants. During the year ended December 31, 2025, 11 partner-operated restaurants were opened in the Middle East.

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Restaurant Activity

The following table details company-owned restaurant unit data for the years indicated.

The following table details partner-operated restaurant unit data for the years indicated.

Results of Operations

Our results of operations as a percentage of total revenue and period-over-period change are discussed in the following section.

Revenue

(1)Average restaurant sales refers to the average trailing 12-month food and beverage revenue for company-owned restaurants in operation for at least 12 full calendar months.

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The following is a summary of the change in restaurant sales for the period indicated:

(1)Other includes the impact of gift card breakage adjustments, as $20.1 million of additional gift card breakage revenue was recorded during the year ended December 31, 2025 as compared to the year ended December 31, 2024.

Food, Beverage and Packaging Costs

Food, beverage and packaging costs decreased 0.2% as a percentage of total revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024. The decrease was primarily due to a 0.6% benefit from menu price increases and, to a lesser extent, cost of sales efficiencies. These decreases were partially offset by 0.4% of inflation, primarily beef and chicken, and a 0.2% impact from tariffs enacted in 2025.

We estimate that the tariffs enacted in 2025 will impact food, beverage and packaging costs by about 15 basis points on an ongoing basis. These estimates could vary based on future tariff policy changes.

Labor Costs

Labor costs increased 0.4% as a percentage of total revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was primarily due to a 0.7% impact from lower sales volumes and 0.4% from restaurant wage inflation. This increase is partially offset by a 0.5% benefit from menu price increases.

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Occupancy Costs

Occupancy costs increased 0.2% as a percentage of total revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was due to the impact from lower sales volumes, as a 0.1% benefit from menu price increases was offset by expenses associated with new restaurants.

Other Operating Costs

Other operating costs increased 0.8% as a percentage of total revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024. The increase was due to the impact from several items, primarily 0.5% of higher marketing and promotional activities, 0.2% of lower sales volumes, and 0.2% of inflation in natural gas and electricity. This increase was partially offset by a 0.2% benefit from menu price increases.

General and Administrative Expenses

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The following is a summary of the change in general and administrative expenses for the period indicated:

Depreciation and Amortization

Depreciation and amortization remained flat as a percentage of total revenue for the year ended December 31, 2025 compared to the year ended December 31, 2024. Increased depreciation expense associated with existing restaurants and the impact from lower sales volumes was offset by the benefit of menu price increases.

Interest and Other Income, Net

Interest and other income, net decreased in dollar terms for the year ended December 31, 2025 compared to the year ended December 31, 2024, primarily due to lower investment balances in U.S. Treasury securities and money market funds and decreased interest income due to lower interest rates in the current year.

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Provision for Income Taxes

The effective income tax rate decreased 0.1% fo

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