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Why Chipotle’s general and admin costs spread across all its restaurants

Amit Jhaveri

Must-know: Chipotle Mexican Grill quarterly overview 2Q14 (Part 10 of 14)

(Continued from Part 9)

General and administrative expenses

Besides the four key costs mentioned in the previous parts of this series, Chipotle Mexican Grill’s (CMG) other costs include general and administrative (or G&A) costs.

Since the company owns all of its restaurants, these costs are spread over all of its units. As a percentage of sales, the G&A costs accounted for 4.1%, excluding stock-based compensation, which remained flat compared to 4% over the same quarter a year ago. With stock-based compensation, the G&A costs represented 7.1% as a percentage of sales, up 90 basis points compared to the second quarter of 2013.

Stock compensation as a part of G&A

The company reported a non-cash stock compensation of $62 million year-to-date, compared to $35 million over the same period a year ago. The company stated that the stock compensation is expected to remain at $98 million. So for the remaining year, the stock compensation will come in lower, compared to the first two quarters.

Stock compensation has increased this year, primarily due to increase in share prices and in the larger number of senior management qualifying for retirement.

Companies such as Panera Bread (PNRA), Potbelly (PBPB), and those found in the Consumer Discretionary Select Sector SPDR Fund (XLY) and the PowerShares Dynamic Food & Beverage ETF (PBJ) reward their senior management team with stock-based compensation, which in some cases may be more than their salary.

Forward G&A guidance

On year -to-date, the company’s G&A costs increased by 1.1% to 7.3% as a percentage of sales, compared to 6.2% over the same period a year ago. For a full-year basis, the company expects the G&A costs to remain at 7% as a percentage of sales.

Continue to Part 11

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