Burrito chain is betting on delivery through DoorDash partnership
which reported sales of $1.4 billion, has rebounded since it was hit by a number of food-safety scares in recent years. PHOTO: SHANNON STAPLETON/REUTERS
Updated July 23, 2019 6:07 pm ET
Chipotle Mexican Grill Inc. CMG 0.30% is selling more burritos even at higher prices.
The fast-casual chain beat expectations on earnings for its second quarter, reporting adjusted earnings per share of $3.99 on $112.9 million in income excluding one-time events. Those were up 39% from last year’s period.
Sales of $1.4 billion were in line with the expectations of analysts polled by FactSet. Same-store sales growth of 10% topped projections, though it also included a 3.5% increase in average restaurant checks, in part reflecting higher menu prices that the chain instituted last year. Bigger average sales on delivery orders also contributed to the increase.
Shares in the Newport Beach, Calif.-based company rose nearly 4% in aftermarket trading.
Chief Executive Brian Niccol said the results reflected better restaurant operations and marketing, along with a focus on digital sales. Chipotle struck a deal with DoorDash Inc. to deliver its meals to customers last year. The two companies have aggressively marketed that partnership in part with free delivery offers and reduced service fees, particularly during major sporting events including the Women’s World Cup. Digital sales roughly doubled during the quarter, Chipotle said.
“We don’t think we have found the level or limit of how high it can go up,” Chipotle Chief Financial Officer Jack Hartung said in an interview about digital sales. Many restaurants now offering delivery through outside operators have grown concerned about the profitability of sales given the fees charged. Mr. Hartung said the burrito chain has helped make its delivery sales profitable by creating dedicated kitchen lines for those sales to avoid jamming up in-store orders.
Chipotle’s costs also grew during the quarter, primarily due to higher avocado prices. The average national retail price of a Haas avocado nearly doubled this month, according to U.S. Department of Agriculture surveys.
Chipotle has rebounded since the burrito chain was hit by a number of food-safety scares in recent years, including E. coli outbreaks at stores across the country. The company shook up its leadership and has focused on core menu items such as burritos and bowls.
“The old narrative just fades from the background,” Mr. Hartung said of the health concerns.
The chain said it expects high-single-digit comparable restaurant sales growth for the year, up slightly from previously reported expectations. It plans to open 140 to 155 new restaurants this year.
Chipotle’s stock is up more than 70% this year, far outpacing the average gain of U.S. restaurant stocks. Some analysts have trimmed their estimates given how far the company’s shares have already risen. Chipotle approved an additional $100 million in stock buybacks during the quarter.
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