Financing

Chipotle sales surge, thanks to digital

Major growth in online and mobile orders helped the chain emerge quickly from its early pandemic slump.
Photograph: Shutterstock

Digital orders now make up nearly half of all of Chipotle Mexican Grill’s sales, leading the chain to strong earnings for its third quarter, the company reported Wednesday.

Same-store sales rose 8.3% for the quarter ended Sept. 30 and revenue increased 14.1% to $1.6 billion.

Last quarter, comparable restaurant sales at the Newport Beach, Calif.-based fast-casual chain fell 9.8% and revenue dropped 4.8% to $1.4 billion.

“Despite COVID, this third quarter talks to the power of our brand and the power of our culture,” CEO Brian Niccol said during a conference call with analysts.

Digital sales remain a major bright spot for the chain, growing 202.5% year over year to $776.4 million. Digital orders now make up 48.8% of sales, with about half of those orders for delivery and the rest for order-ahead transactions, such as in-store pickup and Chipotlane drive-thrus.

Chipotle opened 44 new units during Q3, and closed three stores, bringing its total count to 2,710 locations. Of those 44 new restaurants, 26 included a Chipotlane.

The drive-thrus are significant for the chain, generating about 10% more in sales than stores without Chipotlanes.

“We’re in the phase of proving the digital drive-thru of the future, and I’m glad we’re on the front end of it,” Niccol said.

Going forward, Chipotlanes will be located at a majority of the chain’s new stores. The company is also converting existing stores to add drive-thrus and relocating legacy locations to spots that accommodate them.

“When the opportunity presents to relocate to add a Chipotlane, we’re seeing much more traction with landlords,” he said.

Although the pandemic provides some uncertainty, the chain said it has a “robust new unit pipeline” which could lead to the opening of 200 new stores next year.

Chipotle’s operating margins for Q3 was 19.5%, a decrease from 20.8% during the same period last year. The decrease was driven by costs related to higher delivery sales, beef prices, increased orders of steak and fewer sales of high-margin beverages, the company said.

The chain is currently testing increased menu prices for delivery orders, with models ranging from 7% to 17%, depending on the market. Pre-pandemic, Chipotle charged $3 per delivery order and it is now charging $1, so that offsets some of the pricing increases, the company said.

“We know what levers to pull,” CFO Jack Hartung told analysts. “We don’t want to disrupt consumer demand … We know we can deliver full margin potential.”

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