Chipotle OKs Additional $500 Million for Stock Buybacks

Chipotle posted a larger-than-expected decline in comparable-store sales in it second quarter. (Luke Sharrett/Bloomberg)

Chipotle Mexican Grill has approved an additional $500 million in share repurchases as part of its regular quarterly board authorization, the company said in a securities filing.

The Mexican restaurant chain disclosed the repurchases after market close Monday in a Form 8-K filed with the Securities and Exchange Commission.

In midday trading Tuesday, shares were up 1.2% to $39.05 on the buyback. The benchmark S&P 500 index was flat.

Roughly $750 million—the amount includes the $500 million—has been authorized for share repurchases as of Sept. 15, according to the filing. Chipotle’s buyback program, which has been in place since 2008, has no expiration date.

The company’s market capitalization hovers at $51.8 billion, with 1.34 billion shares outstanding and a public float of 1.33 billion shares.

Chipotle stock has plunged 36% this year due to weaker-than-expected earnings, sluggish growth in the domestic market, and concerns over its high valuation.

While second-quarter earnings were in line with analysts’ estimates, the company missed on same-store sales, which fell 4% year over year. Wall Street had expected a 2.9% decline.

On the earnings call, Chief Financial Officer Adam Rymer said the company had repurchased $436 million worth of common shares at an average price of $50.16 apiece during the quarter, bringing the year-to-date total to a record $990 million.

The board authorized an additional $400 million for buybacks in July and had $839 million remaining at the end of the quarter, Rymer said.

Buybacks increase earnings per share as well as the ownership stake of investors, though this doesn’t necessarily mean boosting shareholder value. McKinsey consultants found in a 2016 analysis that share repurchases “seldom have any lasting effect” on total return to shareholders.

“While it’s true that EPS growth and shareholder returns are strongly correlated, executives and naive investors sometimes take that relationship too seriously,” McKinsey wrote.

Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com