Business

Share Price of Chipotle Increases

On Wednesday, Chipotle released its quarterly earnings. The earnings report show that it has exceeded the revenues indicated by the analyst. Analyst says that this improvement in the earning is due to the increased foot traffic and menu price. The market share of the company also witnessed a raise of 10 percent.

When commenting on the companies performance, the CEO Brian Niccol said, “I’m very pleased to report strong fourth quarter results with 6.1 percent comparable restaurant sales growth that included 2 percent transaction growth.”

Chipotle company stocks were not performing well during the past several years. But soon after the introduction of the CEO, Brian Niccol, the company has been performing efficiently both in sales as well as in the share market. Brian Niccol used lead Yum Brands’ Taco Bell. Since the appointment of Brian, he has been pushing marketing and digital investment to bring the company back to steady growth. An order processed through digital means has a higher check for restaurants.

Below is a comparison between the companies reported value and Wall Street prediction.

• Earnings per share: $1.72, adjusted, vs. $1.37 expected
• Revenue: $1.23 billion vs. $1.194 billion expected
• Same-store sales growth: 6.1 percent vs. 4.49 percent expected

During the fourth quarter of the company, digital orders rose 65.9 percent which accounted for 12.9 percent of sales or $158.6 million in revenue. In order to cope with an increasing number of digital orders, Chipotle is redesigning its kitchens with a separate assembly line solely for those orders. This secondary line has more upgrades, like pickup shelves to display online orders, that are currently getting prepared. These shelves are currently in 1,000 of its restaurants so far.

The company is also in the process of testing “Chipotlanes,” a drive-through windows for customers. Customers can order online and pick them up on their way. So far, ten of Chiptole’s location have this feature. Brian Niccol over a conference call said to the analyst that Chipotlanes are helping both digital and overall sales for the stores where they are currently present. He also added that its still in the testing phase and will be rolled out only when the company is sure of its gains. Going forward, the company is majorly planning to add pickup lanes for the online order to new restaurants instead of remodeling their older stores.

The company recently started a new advertising campaign called “For Real” to showcase its food preparation and fresh ingredients that it uses for preparation. Chipotle also saw a bump at the end of its quarter when it started a free delivery bowl campaign to promote its partnership with Doordash. When speaking about the campaign, Niccol said, infrequent or new customers made up nearly half of the people taking advantage of the offer.

The company also repeated its plan to launch a loyalty program nationwide this year. The testing for the loyalty program began in October in many United States cities to win back customers. The loyalty program is yet another way to increase diners to order their Chipotle burritos digitally. Brian Niccol said the company is still in the early days of understanding the pilot, but it is building on momentum.

The reports for the fiscal fourth-quarter net income is recorded at $1.15 per share or $32.0 million which is less than the previous year. The last year’s fourth quarter income was $43.8 million or $1.55 per share. Omitting the corporate restructuring, restaurant closure costs, and other undisclosed costs, Chipotle earned USD 1.72 per share which topped the expected price of the analyst which was $1.37 per share.

Net sales of the company rose by 10.4 percent to $1.23 billion, topping the expectations of $1.19 billion. Outlets which were recently opened and was in operation at least a year saw sales increase by 6.1 percent during the quarter.

When asked about the companies plan for this year, it said that the company is planning for modest price increases this year, which Chipotle said will be lower than earlier increases. Brian Niccol noted, “The biggest challenge is going to be labor inflation.”

Chipotle claimed that it has started to schedule its employees during its third quarter effectively and that it hopes to see the changes made to help the profit margins throughout the year. The company is forecasting same-store sales to grow in the mid-single digits. It is also planning to open around 140 to 155 new locations, mostly in the second half of the year. On Wednesday the company also announced that its board has approved an additional $100 million of stock buybacks.

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