The burrito brewer has its reasons.
If you were one of the lucky ones that decided to take a chance on Chipotle (CMG) – Get Chipotle Mexican Grill, Inc. Report stock when the chain went public back in January 2006, you’re probably feeling pretty pleased with yourself these days.
After all, the stock was a mere $22 when it debuted, and it’s done nothing but rise since then (with the exception of a brief dip in 2017 during its food safety scandal).
Today it’s $1556.37 per share, a cost that’s far out of reach of many an average investor interested in buying a piece of the fast-food market. There are also its restaurant employees, who might want to invest as well but don’t have a few grand to drop to do so. (They could, of course, buy fractional shares at many brokerages if they wanted to).
Many companies opt for a stock split in a situation like this to increase liquidity and make it possible for more people to afford shares. in fact, several big names have done so this year already. Alphabet (GOOGL) – Get Alphabet Inc. Class A Report announced a 20-for-1 split in the first week of February and Amazon did the same in March, and the stock soared for both as a result.
But Chipotle hasn’t made a move to follow suit, and if its track record is any indication, one probably isn’t coming. Does the burrito giant have no love for mobile investors, or does it just have better things to do with its time?
Is a Stock Split in Chipotle’s Future?
Investors have asked Chipotle about its intentions around a stock split as far back as 2007. At the time, chief financial and development officer Jack Hartung made it clear that the company did not prioritize them, saying “stock splits in terms of adding any kind of value at all is way, way, way down the list.”
He also said that Chipotle preferred to focus on adding investor value to the product itself by innovating and improving its product ingredients, as well as developing its employees.
A recent example is its testing of potentially adding robots in its restaurants to automate and speed up food production (not to mention giving them really cute names like Chippy).
It also debuted a new chicken recipe in late 2021 and announced today it would bring back its “Guac Mode” benefit program, which allows customers to earn points and free guacamole on meals.
Why Chipotle Doesn’t Need to Split its Stock
One look at Chipotle’s fourth-quarter earnings makes it clear that the company is flourishing today, with “$1.4 billion in cash, restricted cash, and investments, with no debt.” It’s especially impressive considering the blow the pandemic dealt to the restaurant industry on the whole, one many were unable to survive.
Remarks from Hartung during the Q4 earnings call also reveal Chipotle’s preference for what it does with its stocks.
“During the fourth quarter, we repurchased $169 million of our stock at an average price of $1,750,” he said. “And we continue to — we expect to continue using excess free cash flow to opportunistically repurchase our stock.”
So if you’ve been eyeballing your online broker wishing that Chipotle would consider a stock split to make purchasing shares more affordable, the bad news is that, well, it’s probably not going to happen. But save up some cash and grab some if you can, because at this rate, the value will probably keep on growing.
