Chipotle Mexican Grill’s new “For Real” ad campaign helped the company generate real sales in September and October.
The Newport Beach, Calif.-based company on Thursday said that the new ads, which kicked off in late September, helped lift sales late in the third quarter and into the fourth quarter.
That helped the company’s same-store sales rise 4.4% in the quarter ended Sept. 30 and could help offset some difficult comparisons toward the end of the year, executives said on the company’s earnings call Thursday.
The results helped the company recover from a food safety incident in Ohio in July.
“There was a lot going on in the quarter,” CFO Jack Hartung said on the earnings call, referring to various promotions the company held as well as the Ohio incident. “The thing we know is the marketing did have an impact. As we went on air and customers started seeing commercials,” sales increased.
He also said that there was “no lasting impact of anything that happened in Ohio.”
Chipotle CEO Brian Niccol promised continued marketing, noting that the company’s national television ads will appear through November and digital and social ads will remain through the year.
He also said that Chipotle would have a presence on national media “where and when it makes sense.”
One of the chain’s biggest efforts is technology. The company has added pickup shelves in many locations and expects to have them in all locations by the end of next year. It has also added digitized second make lines for digital and delivery and catering orders in 750 restaurants. Those lines should be expanded systemwide by the end of next year.
Chipotle also promoted delivery heavily in the quarter. The company ran a free delivery promotion and added nationwide delivery with DoorDash through its mobile app in August.
The company is seeing “good incrementality” with delivery, Niccol said, and “little overlap” between delivery through its own app and through third parties.
Delivery has helped “attract and retain new and lapsed customers,” Niccol said.
Digital sales in the third quarter increased 48.3% and now represent 11.2% of sales. “The No. 1 reason consumers eat elsewhere is they don’t have access to Chipotle,” Niccol said, explaining the reasoning behind the company’s digital efforts.
Revenues at Chipotle increased 8.6% in the quarter to $1.2 billion. Restaurant-level margins increased 260 basis points to 18.7% of sales from 16.1%. Net income was $38.2 million, or $1.36 per share. Excluding one-time costs, net income rose 60.3% to $60.7 million, or $2.16 per share.
The company did spend $15.8 million to corporate restructuring, including severance, relocation and other costs related to the company’s move to California.
Chipotle closed 32 restaurants during the quarter and opened 28. The company has closed 38 restaurants as part of plans to close 55 to 65 underperforming locations. The company expects to close the remaining “over the next several quarters.”
Chipotle does expect to increase the pace of new openings next year, anticipating 140 to 155 new openings, a rate higher than this year.
“The economics support opening restaurants above the rate we opened this year,” Niccol said, noting that the company has had some success with its new format. “We’ve had success in proven markets and even in new markets where we’ve tapped the brakes on. The economic model of new restaurant openings is very powerful.”
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