Change is on the menu at Chipotle Mexican Grill, which once again posted double-digit same-store sales increases and strong growth in digital channels, according to Q4 earnings released late Tuesday.
The Newport Beach, Calif.-based fast casual saw same-store sales climb 13.4% for its quarter ended Dec. 31, 2019, with total revenue increasing 17.6% to $1.4 billion. Traffic grew 8%, with a 5.4% increase in average check.
Chipotle executives credited some of that growth to the success of its limited-time carne asada protein addition, which will be removed from the menu by the end of the current quarter.
“This premium steak continues to exceed our expectations,” Chipotle CEO Brian Niccol said during a call with analysts. “As a result, our supply chain team is exploring options to see if we can add this as a permanent menu item at some point in the future, contingent, of course, on us finding enough supply of high-quality ingredients that meet our Food with Integrity standards.”
As carne asada exits, though, the chain expects to roll out Queso Blanco nationwide. It’ll be the chain’s third attempt at finding a cheese sauce that’s palatable to consumers after previous iterations were criticized for being lumpy and prone to congeal. The new queso, which includes Monterey Jack, white cheddar and several hot pepper varieties, has been tested at dozens of stores in multiple markets as part of the company’s stage-gate innovation process. It will replace the chain’s existing queso “shortly,” Niccol said.
Several other menu items are in the early stages of testing.
Also driving sales growth at Chipotle are the chain’s pickup-only drive-thrus, called “Chipotlanes.” The company opened 46 new Chipotlanes during Q4, for a total of 66 of the drive-thrus. In 2020, the chain plans to open 150 to 165 new units, with more than half featuring a drive-thru.
The drive-thrus represent the highest-margin order-ahead and pickup transaction for Chipotle, company executives said.
Digital sales grew 78.3% and now account for 19.6% of the company’s total sales.
“We’re delighted that we’re closing around 20%,” Niccol told analysts. “But that’s not the end of this journey. That’s just one of the stops on our journey to, I think, a much bigger business than where we are today.”
There’s growth to be found in continued operational efficiency, he said. The brand is always looking for ways, through training, incentives and other methods, to boost throughput.
“You’re not running the restaurants correctly if we’re not going fast,” Niccol said. “One thing we do know is a busy restaurant, a restaurant that’s running quick, is a well-run restaurant.”
For full-year 2020, Chipotle forecasts same-store sales growth in the mid-single digits.
One potential pitfall for the chain may come in the form of an anticipated settlement following the U.S. attorney general’s investigation of Chipotle’s foodborne-illness outbreak. Chipotle said it is budgeting $25 million for the settlement, following an investigation that began in 2016. The amount is an estimate, and there is no assurance that a settlement will be reached, though Chipotle continues to cooperate with the investigation, Niccol said.
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