Chipotle Mexican Grill Inc. (NYSE:CMG)

The short-term operating activity ratios exhibit varied trends over the observed period. Generally, the company demonstrates efficient management of its short-term assets and liabilities, though fluctuations are present. A notable shift in several ratios occurs between the first half of 2023 and the latter half, warranting further investigation.

Inventory Turnover

Inventory turnover generally remained strong, fluctuating between approximately 175 and 218 throughout the period. A slight dip was observed in the latter half of 2022, followed by a recovery in early 2023. The final quarter of 2024 and first quarter of 2025 show a decrease, but remain at a relatively healthy level. The average inventory processing period remained consistently at 2 days throughout the entire period.

Receivables Turnover

Receivables turnover displayed significant volatility. It peaked in the second and third quarters of 2023, reaching levels above 150, before declining substantially in the fourth quarter of 2023 and the first quarter of 2025. The average receivable collection period remained consistently low, generally between 2 and 5 days, with a slight increase observed in the fourth quarters of 2022 and 2025.

Payables Turnover

Payables turnover remained relatively stable, generally ranging between 33 and 43. There were no dramatic shifts observed in this ratio. The average payables payment period remained consistently around 9-11 days, indicating consistent supplier payment practices.

Working Capital Turnover

Working capital turnover experienced a marked decline beginning in the first quarter of 2023, falling from nearly 30 to a low of approximately 14 in the second quarter of 2023. While it recovered somewhat in subsequent quarters, it remained below pre-2023 levels until a substantial increase in the fourth quarter of 2025, reaching 42.77. This suggests a change in the relationship between sales and working capital.

Operating and Cash Conversion Cycles

The operating cycle generally remained between 5 and 7 days. The cash conversion cycle was consistently negative, ranging from -6 to -2 days, indicating the company typically collects cash from customers before needing to pay its suppliers. The cash conversion cycle became more negative in the latter half of 2023 and the first half of 2024, before becoming less negative in the final quarters of the observed period.

Overall, the company demonstrates efficient liquidity management, as evidenced by the consistently negative cash conversion cycle. However, the fluctuations in receivables turnover and working capital turnover, particularly the decline in 2023 and subsequent partial recovery, suggest potential shifts in sales strategies, credit policies, or working capital management practices that warrant further scrutiny.

Inventory turnover exhibited fluctuations over the observed period, spanning from March 31, 2022, to December 31, 2025. Generally, the ratio demonstrates a relatively high level of activity, indicating efficient inventory management, though with periods of decline.

Overall Trend

The inventory turnover ratio began at 203.97 in March 2022 and generally decreased to 179.76 by December 2025. While there are quarterly variations, a slight downward trend is discernible over the entire period. This suggests a potential slowing in the rate at which inventory is sold and replenished.

Initial Period (March 2022 - December 2022)

From March 2022 to June 2022, the ratio increased from 203.97 to 214.37, representing a peak within the observed timeframe. A subsequent decline was observed through December 2022, falling to 184.27. This initial decrease could be attributed to seasonal factors or changes in purchasing patterns.

Fluctuations in 2023

The year 2023 showed considerable volatility. The ratio started at 194.58 in March, decreased to 191.68 in June, then dropped significantly to 175.86 in September before recovering somewhat to 185.34 by December. This suggests potential disruptions in the supply chain or promotional activities impacting sales velocity during specific quarters.

Recent Performance (2024-2025)

The ratio increased to 197.22 in March 2024 and peaked at 218.61 in June 2024, before declining sharply to 161.15 in September 2024. The ratio recovered slightly to 169.51 in December 2024. The final period observed shows a continued decline, with the ratio falling to 188.55 in September 2025 and 179.76 in December 2025. This recent decline warrants further investigation to determine the underlying causes.

Inventory Levels

Inventory levels generally increased over the period, from US$29,852 thousand in March 2022 to US$49,508 thousand in December 2025. This increase in inventory, coupled with the fluctuating and ultimately declining turnover ratio, suggests a potential need to reassess inventory management strategies.

In conclusion, while the inventory turnover ratio remains relatively high, the observed downward trend and recent volatility suggest a potential weakening in inventory efficiency. Continued monitoring and analysis are recommended to understand the drivers behind these changes and to optimize inventory levels and sales strategies.

The receivables turnover ratio exhibits considerable fluctuation over the observed period, spanning from March 31, 2022, to December 31, 2025. An initial upward trend is noted in the first half of 2022, followed by a decline in the latter half of the year. Subsequently, the ratio experiences a significant surge in the first half of 2023, maintaining relatively high levels through the third quarter before decreasing again towards the end of the year. This pattern of fluctuation continues into 2024 and 2025, with a notable decrease observed in the final quarter of 2025.

Overall Trend

While the ratio demonstrates volatility, a general observation suggests a slight decrease in receivables turnover towards the end of the analyzed timeframe. The ratio began at 87.64 in March 2022 and concluded at 76.22 in December 2025. However, this overall decrease is punctuated by periods of substantial increases, indicating inconsistent collection efficiency.

Peak Performance

The highest receivables turnover ratio was recorded at 152.24 in June 2023. This suggests a period of particularly efficient collection of accounts receivable, potentially linked to specific promotional activities, changes in credit terms, or seasonal sales patterns. The ratio of 136.37 in March 2023 also indicates strong performance.

Periods of Lower Turnover

The lowest ratio was observed in December 2025, at 76.22. This indicates a slower rate of converting receivables into cash during that period. Similarly, the ratio of 80.79 in December 2022 and 85.44 in December 2023 also represent relatively lower turnover rates, potentially signaling issues with collection processes or an increase in extended payment terms.

Correlation with Revenue

A review of the revenue figures alongside the receivables turnover ratio suggests a complex relationship. While revenue generally increased over the period, the receivables turnover did not consistently follow suit. For example, revenue increased from June 2023 to September 2023, but the receivables turnover decreased. This suggests that while sales volume increased, the efficiency of collecting on those sales did not necessarily improve.

Recent Performance

The most recent quarters (September 30, 2025, and December 31, 2025) show a decline in receivables turnover, coupled with a stabilization in revenue. This could indicate a potential build-up of accounts receivable, warranting further investigation into collection practices and credit policies.

The payables turnover ratio for the analyzed period demonstrates fluctuations, generally remaining within a relatively narrow range. An initial observation reveals a period of variability followed by a degree of stabilization, and then a final period of fluctuation. The ratio reflects the efficiency with which the company is managing its accounts payable, indicating how many times it pays its suppliers within a year.

Overall Trend

The payables turnover ratio began at 36.05 and exhibited an increase to 39.82, followed by a slight decrease to 38.60, and then a further decrease to 35.61. A subsequent increase to 36.87 was observed, followed by a more substantial rise to 42.59. The ratio then decreased to 34.04, recovered to 36.86, and continued to fluctuate between approximately 36 and 42 for the remainder of the period, ending at 41.82.

Initial Period (Mar 31, 2022 – Jun 30, 2023)

From March 31, 2022, to June 30, 2023, the ratio experienced a period of volatility. It initially increased, suggesting improved efficiency in paying suppliers, but then decreased, potentially indicating a lengthening of payment terms or an increase in accounts payable. The peak of 42.59 in June 2023 represents the highest value within the observed timeframe.

Subsequent Period (Sep 30, 2023 – Dec 31, 2025)

Following the peak in June 2023, the ratio decreased to 34.04, before recovering somewhat. The period from September 2023 through December 2025 shows continued fluctuation, with the ratio generally remaining between 33.65 and 41.82. This suggests a more stable, though still variable, pattern in the company’s payment practices. The final value of 41.82 indicates a return to levels seen earlier in the analyzed period.

Accounts Payable and Restaurant Operating Costs Relationship

While the analysis focuses on payables turnover, it is important to note that restaurant operating costs increased consistently throughout the period. The fluctuations in payables turnover, in conjunction with increasing operating costs, suggest the company is actively managing its supplier relationships, potentially adjusting payment terms to optimize cash flow in response to changing operational needs.

In conclusion, the payables turnover ratio demonstrates a dynamic pattern over the analyzed period. While fluctuations are present, the ratio generally indicates a consistent ability to manage accounts payable, with a recent trend towards higher turnover rates.

The working capital turnover ratio exhibited considerable fluctuation throughout the observed period, spanning from March 31, 2022, to December 31, 2025. Initially, the ratio demonstrated a decreasing trend from 29.78 to 24.45 over the first four quarters, before experiencing a sharp increase in the final quarter of 2025.

Initial Trend (Mar 31, 2022 – Dec 31, 2022)

From the first quarter of 2022 through the fourth, the working capital turnover ratio decreased from 29.78 to 34.00, indicating a less efficient utilization of working capital in generating revenue. This suggests a potential build-up in working capital components relative to sales during this period.

Period of Stability (Mar 31, 2023 – Dec 31, 2023)

The ratio remained relatively stable between 14.35 and 18.49 throughout 2023. This suggests a consistent, though lower, level of efficiency in converting working capital into sales. The values in 2023 are notably lower than those observed in 2022, indicating a significant shift in the relationship between working capital and revenue.

Fluctuations and Final Increase (Mar 31, 2024 – Dec 31, 2025)

The ratio experienced further fluctuations in 2024, ranging from 15.74 to 20.15. The final quarter of 2025 saw a substantial increase to 42.77, representing the highest value in the observed period. This dramatic rise suggests a significant improvement in working capital efficiency, potentially due to a decrease in working capital or a substantial increase in revenue, or a combination of both. This final value is a considerable outlier compared to the preceding quarters.

Overall, the working capital turnover ratio demonstrates a pattern of initial decline, followed by a period of relative stability at a lower level, and culminating in a significant increase in the final quarter. The fluctuations suggest potential changes in the company’s operational strategies, inventory management, or credit policies impacting the relationship between working capital and revenue generation.

The average inventory processing period remained consistently at two days throughout the observed period, spanning from March 31, 2022, to December 31, 2025. No fluctuations or discernible trends are present within the examined timeframe.

Average Inventory Processing Period

The metric consistently registered at two days across all reported quarters. This indicates a highly efficient inventory management system, where inventory is rapidly converted into sales. The sustained consistency suggests a stable operational process and effective supply chain management.

The unchanging nature of this metric suggests a robust and well-controlled inventory process. Further investigation into the underlying factors contributing to this consistent performance may be beneficial to identify best practices and potential areas for continued optimization. However, based solely on this metric, no areas of concern are apparent.

Potential Implications

A consistently low average inventory processing period can indicate minimal holding costs and reduced risk of obsolescence. It also suggests the company is adept at responding to demand fluctuations. However, it is important to consider whether maintaining such a lean inventory posture could potentially lead to stockouts if demand were to unexpectedly surge.

In conclusion, the average inventory processing period demonstrates a high degree of stability and efficiency over the analyzed period. The consistent value of two days suggests a well-managed inventory system with minimal delays in converting inventory into sales.

The average receivable collection period demonstrates a generally stable pattern with some quarterly fluctuations over the observed timeframe. The period consistently remains low, indicating efficient management of receivables.

Overall Trend

The average receivable collection period predominantly fluctuates between 2 and 5 days. There is no clear long-term upward or downward trend. The metric exhibits cyclical behavior, with periods of consistently low collection times followed by slight increases.

Short-Term Fluctuations

The period was consistently at 4 days for the first three quarters of 2022, increasing to 5 days in the fourth quarter. A similar pattern occurred in 2023, with the first two quarters at 3 and 2 days respectively, followed by 3 and 4 days in the subsequent quarters. This pattern continued into 2024, and again in the first three quarters of 2025.

Recent Performance

The most recent periods, specifically the first half of 2025, show a collection period of 3 days. The final two quarters of the observed period show a return to 5 days, mirroring the pattern observed in previous years. This suggests a potential seasonal or operational factor influencing collection times at the end of each year.

Consistency

Despite the quarterly variations, the average receivable collection period remains remarkably consistent. The majority of values fall within a narrow range, indicating a robust and reliable receivables management process. The company consistently collects its receivables within a very short timeframe.

The observed fluctuations, while present, do not appear to represent a significant deterioration in collection efficiency. The consistent low average suggests effective credit policies and collection procedures are in place.

The operating cycle remained relatively stable over the analyzed period, spanning from March 31, 2022, to December 31, 2025. Both components of the operating cycle – average inventory processing period and average receivable collection period – exhibited minimal fluctuation, contributing to the overall consistency.

Average Inventory Processing Period

The average inventory processing period consistently registered at 2 days throughout the entire observation window. This indicates a highly efficient inventory management system, with minimal time elapsing between acquiring inventory and making it available for sale. No discernible trend is present.

Average Receivable Collection Period

The average receivable collection period demonstrated slight variability, generally fluctuating between 2 and 5 days. A slight decrease was observed from 4 days in the first quarter of 2022 to 2 days in the second quarter of 2023. However, it subsequently increased to 5 days in the fourth quarter of 2023 and the fourth quarter of 2025. The period generally remained within a narrow range, suggesting effective credit and collection policies.

Operating Cycle

Consequently, the operating cycle, calculated as the sum of the average inventory processing period and the average receivable collection period, remained consistently low, ranging from 4 to 7 days. The majority of quarters reported an operating cycle of 5 or 6 days. A slight increase to 7 days was noted in the fourth quarters of 2022 and 2025, mirroring the fluctuations in the receivable collection period. Overall, the operating cycle suggests a rapid conversion of investments in inventory and receivables into cash.

In summary, the analyzed ratios indicate a consistently efficient operating cycle with minimal delays in either inventory processing or receivable collection. The slight variations observed do not appear to represent a significant shift in operational efficiency.

The average payables payment period remained remarkably stable over the observed period, spanning from March 31, 2022, to December 31, 2025. Fluctuations were minimal, generally oscillating between nine and eleven days. A slight increase to eleven days was noted in September 2022 and September 2025, while the period remained at ten days for the majority of the quarters analyzed.

Overall Trend

The average payables payment period demonstrates a consistent pattern, indicating a predictable and efficient management of supplier credit terms. There is no discernible long-term upward or downward trend.

Quarterly Variations

The period consistently remained within a narrow range. The two instances of eleven days suggest potential, but temporary, shifts in payment practices or supplier arrangements during those specific quarters. These deviations did not establish a sustained change.

Relationship to Payables Turnover

The average payables payment period is inversely related to the payables turnover ratio, as expected. While the payables turnover ratio exhibited more variation than the payment period, the consistent payment period suggests the company maintained a deliberate approach to managing its obligations, even with fluctuations in purchasing volume or supplier terms reflected in the turnover ratio.

Recent Performance

The most recent quarter, ending December 31, 2025, shows a payment period of nine days, aligning with the most frequent value observed throughout the analyzed timeframe. This suggests continued stability in the company’s accounts payable management practices.

The short-term operating activity of the company, as measured by its cash conversion cycle and component ratios, demonstrates a generally efficient management of working capital over the observed period. The average inventory processing period remained consistently low at two days throughout the entire timeframe, indicating rapid inventory turnover.

Average Receivable Collection Period

The average receivable collection period fluctuated modestly, generally ranging between three and five days. A slight decrease was observed from four days in the first quarter of 2022 to a low of two days in the second quarter of 2023. However, it increased to five days in the fourth quarters of 2022 and 2025. The overall trend suggests efficient collection of receivables, though with some quarterly variation.

Average Payables Payment Period

The average payables payment period exhibited relative stability, typically between nine and eleven days. A slight dip to nine days occurred in the second and fourth quarters of 2022, and again in the fourth quarter of 2025. The consistency suggests a predictable and managed approach to supplier payments.

Cash Conversion Cycle

The cash conversion cycle consistently remained negative, ranging from -6 to -2 days. This indicates that the company generally receives cash from customers before it needs to pay its suppliers. The cycle reached its most negative value of -6 days in the third quarter of 2023 and again in the third quarter of 2025, suggesting peak efficiency in working capital management during those periods. A slight improvement towards a less negative value was observed in the fourth quarters of 2022 and 2025, moving to -2 days, potentially reflecting changes in the timing of payables or receivables. Overall, the consistently negative cash conversion cycle is a positive indicator of liquidity and efficient working capital management.

In summary, the company demonstrates a strong ability to convert its investments in inventory and other resources into cash in a timely manner. The consistent negative cash conversion cycle highlights effective management of the entire operating cycle.