Chipotle Mexican Grill is holding on to recent increases in digital sales as its online orders for the first time overtook those made at its restaurants.
The first quarter results released on Wednesday exceeded Wall Street estimates. In the next quarter, Chipotle meets the weakest quarter of the previous year. That means sales growth in the same store is expected to increase by up to 30%.
The company’s shares rose less than 1% in expanded trading.
The company reported, relative to Wall Street expectations based on an analyst survey by Refinitiv:
- Earnings per share: $ 5.36 adjusted versus $ 4.89 expected
- Revenue: $ 1.74 billion versus $ 1.74 billion expected
Chipotle reported net income of $ 127.1 million, or $ 4.45 per share, for the first quarter compared to $ 76.4 million, or $ 2.70 per share, last year. The costs related to corporate restructuring, impairments and closings of restaurant facilities as well as Covid-19 weighed 91 cents per share on earnings.
Excluding these items, the company made $ 5.36 per share, beating the analysts surveyed by Refinitiv at $ 4.89 per share.
Net sales increased 23.4% to $ 1.74 billion and were in line with expectations. Sales in the same store increased by 17.2% compared to the same period last year and by 21% compared to 2019. The company credited new menu items, online ordering, and government stimulus checks, putting more money in the hands of consumers. During the quarter, Chipotle released cauliflower rice, which was an additional $ 2, and quesadillas, an exclusive digital product.
CEO Brian Niccol said about 1 in 10 customers ordered the quesadillas, which helped the company see the highest number of new customers in March. Niccol also said customers are treating the quesadillas as a new dining occasion.
The successful launch of quesadillas in March could have been a factor in Chipotle’s digital sales growth. Online orders more than doubled in the quarter, accounting for 50.1% of total sales.
Digital pick-up orders are more profitable for the company than delivery or personal orders. CFO Jack Hartung said the company increased delivery prices by 4% in early April to offset higher delivery costs. In the fourth quarter, menu prices for delivery orders were increased by an average of 13%.
“We didn’t see much resistance, so I think customers understand that there is a premium cost associated with a premium comfort experience,” said Curt Garner, chief technology officer, in an interview.
At the same time, executives said customers will return to Chipotle’s dining rooms when the economy reopens. According to Niccol, customers in the dining room are different from those who order online, so they don’t cannibalize sales from one another.
Chipotle opened 40 new locations in the quarter, more than half of which included drive-through lanes for picking up digital orders. Five restaurants were closed.
The company declined to provide an outlook for revenue growth for the remainder of 2021, citing the uncertainty caused by the pandemic. Around 200 new locations are expected to open this year, provided there are no significant delays related to the crisis. Niccol also said the company plans several market tests for new menu items later this year.