Earnings

Digital Drives 61 Pct Of Chipotle’s Q2 Sales

The digital shift saved Chipotle in Q2. The company announced earnings Thursday (July 22) that showed not only a huge spike in digital orders, but side benefits as well, with order-ahead capabilities and new customers setting the chain up for a Digital 3.0 future.

By the numbers, the company showed a $1.4 billion in revenue, which was down 4.8 percent over the same quarter in 2019. That drop followed the pandemic with April down 24 percent, May down 7 percent and June up 2 percent. While in-store comps were down, the quarter would have been an absolute disaster if not for the digital capabilities and order-ahead service it implemented during the pandemic, all fueled by delivery deals with Uber Eats and Grubhub. Digital revenue for Chipotle rose 216 percent and accounted for 60.7 percent of the chain’s revenue. All told, order ahead sales have risen 140 percent since the pandemic began, while home or office delivery has spiked 125 percent.

“We’re also encouraged by the fact that there is a higher incidence of new customers coming to the (digital) platform, making their second purchase,” said CEO Brian Niccol on the earnings call. “In the same month that digital customer is spending more than before. This is another example of our digital assets being sticky, resulting in our July digital mix being nearly 50 percent of sales on the margin for the quarter.”

Niccol did not put exact numbers on two key developments mentioned on the call. He said that the bulk of digital sales were from new customers that never set foot inside a Chipotle dining room. He also said that “the bulk” of new customers signed up for the Chipotle rewards program. That development and the data generated from it has already opened up new opportunities for the company.

“We’ve created these journeys that are targeted to new customers and existing customers, whether they’re light, medium or heavy spenders,” he said. “And what we’re seeing already with these journeys is we do have the ability to influence behaviors, whether it’s getting another occasion (visit), or getting them to add on to an occasion that they’re already doing with us. So what I would tell you is, a lot of the digital growth came from new customers. And what we’re seeing already is really great progress on using the data to then influence their behavior going forward.”

Niccol also mentioned that the company has been offering free delivery during the pandemic through Uber Eats and GrubHub. That will end at some point and cost the company about 5 percent of total sales revenue.

“We’re optimistic that the order ahead transaction will continue to be a big driver of future growth, which could benefit both sales and margins element that has seen a meaningful acceleration,” he said, “and has also over the past few months added to our rewards program, which now has nearly 15 million enrolled members.”

The results were consistent with initiatives and observations set out by Chipotle Chief Restaurant Officer Scott Boatwright in a PYMNTS roundtable discussion with PYMNTS CEO Karen Webster, held in late May

“The future is going to be about convenience and access,” Boatwright said. “Ten years ago, in our industry specifically, access was about the number of locations at the right spot to meet consumers where they are. But I think the aggregators have helped us turn that thinking on its head, so going forward, I think access won’t look like new brick-and-mortar dining rooms and restaurants in the communities we serve. We might see a rise of digital-only kitchens.”

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New PYMNTS Study: Subscription Commerce Conversion Index – July 2020 

Staying home 24/7 has consumers turning to subscription services for both entertainment and their day-to-day needs. While that’s a great opportunity for providers, it also presents a challenge — 27.4 million consumers are looking to cancel their subscriptions because of friction and cost concerns. In the latest Subscription Commerce Conversion Index, PYMNTS reveals the five key features that can help companies keep subscribers loyal despite today’s challenging economic times.

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