Operations

Chipotle squashes Q1 predictions

April 21, 2021

It's good to be in the burrito game these days as long as your digital playbook is just as strong. It's a strategy Chipotle seems to have under control, considering it reported Wednesday that its Q1 earnings per share of $5.36 beat Wall Street's expectations of $4.89. Revenues came in at $1.74 billion, matching analysts' predictions, according to a company press release.

"Chipotle is off to a great start in 2021 thanks to our employees and their incredible level of collaboration and tireless dedication," CEO Brian Niccol said in Wednesday's earnings call. "As vaccines roll out and we get closer to moving past this pandemic, I believe Chipotle is well-positioned for growth. I'm excited about our future as we remain focused on innovating in culinary, leading in food with integrity, and providing convenient access inside our restaurants and through our expanding digital ecosystem."

All but about 20 restaurants are now open, with 92% offering in-restaurant dining with capacity limitations, said Niccol, who pointed out investments in digital features and innovations helped Q1 digital sales grow 134% year-over-year to $870 million and represents 50% of sales.

"Momentum continued to build within the quarter, with March setting a new record for digital transactions, supported by our best-ever digital order ahead month, over 800,000 app downloads and the most new digital customers since May of 2020," he said. "With the overall digital mix remaining relatively stable for the last three quarters, we're delighted to see that our highest-margin transaction, digital pickup orders, were slightly more than half of digital sales during Q1. Within the delivery channel, about 40% were initiated through the Chipotle app or website while the remainder were through a handful of partners."

What's next?

Chipotle, which has nearly 2,700 units, is on track to fulfill its vision of more than 6,000 restaurants with AUVs above $2.5 million and restaurant-level margins above 25%, said Niccol, who listed five steps to hit those goals:

Make the brand visible.
Use a disciplined approach to creativity and innovation.
Leverage digital capabilities to drive productivity and expand access, convenience and engagement.
Engage customers through the loyalty program.
Run restaurants with a strong culture that provides delicious food with integrity, while delivering exceptional in-restaurant and digital experiences.

Specifically, the chain is making enhancements to the app, website, delivery and group offerings to support the current and expected future growth within the digital channel.

"We'll also continue to make important tech investments to create a path for the future," said Niccol, who cited its recent investment in Nuro, a company t uses robotics in its fleet of on-road, occupantless and autonomous vehicles to deliver everyday consumer goods.

"We believe it has the potential to take the delivery experience to the next level," he said..

First-quarter highlights, year over year:

Revenue increased 23.4% to $1.7 billion.
Comparable restaurant sales increased 17.2%.
Digital sales grew 133.9% and accounted for 50.1% of sales.
Restaurant-level operating margin was 22.3%, an increase of 470 basis points.
Diluted earnings per share was $4.45, net of a $0.91 after-tax impact from expenses related to the 2018 performance share ("PSU") modification to account for the unplanned. effects of COVID-19, restaurant asset impairment and closure costs, as well as corporate restructuring, a 64.8% increase from $2.70. Adjusted diluted earnings per share excluding these charges was $5.36, a 74.0% increase from $3.08.
Opened 40 restaurants and closed five restaurants.