With digital sales rocketing by 78.3 percent and accounting for 19.6 percent of sales, Chipotle Mexican Grill reported a comparable restaurant sales increase of 13.4 percent for the fourth quarter. The quick-service restaurant (QSR) company opened 80 new restaurants, with the inclusion of one relocation, and closed three locations during the quarter.
CEO Brian Niccol said in an earnings call with analysts that the company significantly upgraded its capabilities during 2019 by completing the rollout of digital pickup shelves, digitizing its digital make line and expanding its delivery digital capabilities to more than 98 percent of its store base. In the fourth quarter, he said, those efforts resulted in $282 million in digital sales, which grew 78 percent year over year and represented 19.6 percent of its mix.
In only three years, the company quadrupled its digital business, achieving more than $1 billion in sales in 2019, Niccol said. He noted that the Chipotlane drive-thrus are “off to a great start.” The next potential piece to bolster the company’s digital offerings, he said, is a new restaurant design that helps evolve its mobile pickup shelves to an integrated digital pickup portal.
Chipotle started to pilot multiple formats, including one with a walkup window across from Chicago’s Wrigley Field. The 2,000-square-foot restaurant is slightly smaller, has fewer seats, a diner-facing grab-and-go beverage case, and digital pickup shelves near the front door. With many digital tools in place, Niccol said that 2020 “will be about using them more efficiently and really leveraging our rewards program.” He noted that the offering has over 8.5 million enrolled members.
The company, he said, focused on member growth in 2019, and in 2020 it will not only focus on growing enrollment, but it will also seek to optimize database marketing as it develops its customer resource management (CRM) abilities.
Niccol said the company’s marketing efforts were “elevated” this year as it used a stage-gate process to make innovation that leads food culture and meets the requests of diners. The firm rolled out multiple menu items that were validated by the process. Those included its pre-configured diet-driven lifestyle bowls it rolled out in January 2019. Niccol said those showed that “whatever lifestyle or diet you want to pursue, Chipotle’s real ingredients are a perfect fit.”
The company recently enhanced the platform by adding a new super green salad mix comprised of hand-cut romaine, baby kale and baby spinach. Another item was carne asada, which rolled out in September, and it will transition out by the close of Q1. Niccol said, “this premium steak continues to exceed our expectations.” As a result, the firm’s supply chain team is looking to see if it can add the product as a permanent menu item sometime in the future so long as the company can find sufficient supply that meets its standards.
As the company thinks about 2020 and beyond, its goal is to be rolling out one to two menu items on average per year. Niccol said its pipeline remains robust with queso blanco, quesadillas and beverages currently being tested in various markets. The queso blanco has been validated through the stage-gate process, which enables the national rollout and replacement of its current queso shortly. It also has multiple menu items in the early stages of testing. “We will keep you updated on their progress over time,” Niccol said.
Chipotle Mexican Grill came out ahead of top- and bottom-line estimates for the fourth quarter, reporting revenues of $1.4 billion and adjusted diluted earnings per share excluding charges of $2.86 for the fourth quarter. Analysts had expected revenues of $1.4 billion and earnings per share of $2.75.