Article
Chipotle cites increased throughput as a driver behind same-store sales lift
Same-store sales drive strong second quarter results.
July 22, 2014 by Brenda Rick Smith — Editor, Networld Media Group
Chipotle reported a strong second quarter Monday, with a 28.6-percent increase in revenue.
A same-store sales increase of 17.3 percent and the opening of 45 new restaurants drove the increase, according to Chairman and Co-CEO Steve Ells.
"Our ability to generate such strong sales growth is the direct result of our restaurant managers and crews providing an exceptional dining experience which keeps our customers coming back and allows us to build such a strong customer loyalty," Ells said during the company's earnings call Monday. "Ultimately, our performance comes down to our continued focus on strengthening our unique food culture and our special people culture."
Price increase gives sales a bump
Same-store sales also benefited from a 5-percent increase in the average check size, about half of which is attributed to an increase in prices earlier this year, said CFO Jack Hartung.
Chipotle raised prices around 6.5 percent, with steak prices jumping 9 percent and chicken going up 5 percent.
Customers have been trading down from steak to chicken, said Hartung, and Chipotle will continue to watch for resistance to the new pricing structure in the form of less traffic or increased trading down.
Catering revenue increases
Catering saw gains this quarter, representing 1.6 percent of revenue, up from 0.3 percent of revenue during the same quarter last year, said Co-CEO Monty Moran said during the call.
The increase in catering during the quarter was driven by seasonal events like graduations, and is likely to taper off the remainder of the year, added Hartung.
Increased throughput noted
Moran echoed Ells' praise for restaurant managers and crews, pointing to gains in throughput and transaction comps.
According to Moran, throughput increased by eight transactions per hour during peak lunch and dinner hours. Comps rose 9.4 percent during lunch and 13.3 percent during dinner.
"Good throughput is one way of providing great customer service," said Moran.
New store openings on track
Chipotle remains on track to open 180 to 195 new stores this year. Seventy percent will open in proven markets, according to Moran, while an additional 15 percent will open in developing or established markets and another 15 percent will open in new markets, including Duluth, Minn., Texarkana, Texas, Mobile, Ala., and Charleston, W.Va.
Sourcing challenges
Ells acknowledged Chipotle's challenge in sourcing hormone-free beef domestically. A cattle shortage forced Chipotle to turn to conventionally raised cattle for a time, but Ells believes the company has found a solution by sourcing grass-fed beef from Australia.
In addition, Chipotle recently announced plans to purchase more than 20 million pounds of locally grown produce in its restaurants this year, up from its 2013 goal of 15 million pounds. All of Chipotle's locally grown produce will come from within 350 miles of the restaurants where it will be served, execs said.
Image courtesy of Chipotle.
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