- Chipotle is the latest restaurant brand to secure cash from a revolving credit line, drawing down $600 million on Friday, according to Reuters.
- Chipotle had $909 million in cash and investments and no debt as of March 31.
- Chipotle’s Q1 2020 same-store sales were up 3.3% and revenue increased 7.8% to $1.4 billion.
Though Chipotle’s Q1 results generated a rare positive same-store sales performance in the industry, that doesn’t mean it’s been completely insulated from the devastating effects of nationwide lockdowns in response to COVID-19. Comp sales in March were down 16%, despite the company’s digital sales growth of nearly 81%.
A number of companies across industries have secured cash from revolving credit lines as they navigate sales declines from the novel coronavirus crisis. McDonald’s, for example, has drawn down $1 billion in credit, while Yum Brands tapped into a $525 million revolving credit facility, both back in late March. According to Restaurant Business, a majority of publicly traded restaurant companies have made this move.
The point is simply to have the cash on hand to get through the crisis with as minimal damage as possible. That means minimal layoffs and minimal rent deferrals. The fact that Chipotle secured its cash after the challenging month of March perhaps indicates that a full recovery is still a ways off for the industry.
No doubt challenges persist. States are slowly reopening their restaurants bit by bit, but dining rooms remain only partially accessible. During Chipotle's Q1 call, CFO John Hartung acknowledged that the next few months are going to be “bumpy.”
Chipotle has preserved liquidity in other ways as well, including buying back about $54 million of stock and suspending its buyback program. The company said these measures have secured enough cash to sustain the business for over a year.
Still, Hartung added that “what is going to be predictable is the investments we're going to make. We're going to make them in our people. We're going to be able to make investments in our future.”
Securing additional cash at this point in the crisis could also mean Chipotle is ready to be quick and aggressive with its ambitious post-crisis plans. After its earnings call, Hartung told MarketWatch there was no need to pull back on its technology or new store investments.
“We are in a financial position with our balance sheet and no debt that we can invest in our future,” he said.