Chipotle CEO’s Run of Better Results Continues as Sales Beat

(Bloomberg) -- Chipotle Mexican Grill Inc. jumped after second-quarter earnings showed the burrito chain’s investment in digital ordering, delivery and advertising is paying off.

• Same-store sales, a key gauge of success for restaurants, rose 10%, compared with the 8.4% projected by analysts surveyed by Consensus Metrix. That’s the 10th straight quarter in positive territory and shows the company is keeping up the momentum. The company also strengthened its outlook again, forecasting comparable restaurant sales growth in the high single digits this year, up from a “mid to high” single-digit range before.

Key Insights

• The results underscore how Chief Executive Officer Brian Niccol’s moves, including bigger bets on delivery and mobile ordering, are gaining steam. Both higher foot traffic and increased prices were behind the same-store sales gain, the company said on Tuesday.

• The rise in sales in spite of higher costs is a positive sign for investors. Diners, for example, have proven willing to pay more for guacamole as the price of avocados rises. More price pressure could be in store, as the cost of proteins such as pork and chicken is also poised to rise this year and into 2020, and shareholders will be watching for any signs that consumers are tired of paying more.

• Chipotle has added a second food assembly line to many of its restaurants to faster churn out digital orders, which nearly doubled in the second quarter. The company sees the second line, along with pick-up shelves and drive-up windows, fueling growth in the cutthroat U.S. restaurant market.

Market Reaction

• The shares rose as much as 6.2% to $785.15 in late trading in New York. The company last week hit a record high of $764.04.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder

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