Chipotle Is Starting to Return to Form
(Bloomberg Opinion) -- If Chipotle Mexican Grill Inc. is to enjoy a bona fide turnaround, it can’t be built solely on price increases and side orders of queso. So it’s noteworthy that the burrito giant notched a win on another important metric in the latest quarter.
Chipotle said Wednesday that transactions rose by 2 percent from a year earlier. The figure is a proxy for traffic, and the gain snapped a streak in which its comparable sales growth was being fueled by fatter average checks rather than increased customer visits.
It is a good sign for Chipotle that it managed to see growth on this measure at a time when so many of its restaurant industry peers are struggling to do the same.
And executives apparently expect they can build on this momentum. Chipotle said it expects to deliver “mid-single-digit” comparable-sales increases this year, with price hikes only accounting for 1.7 percent of the gains.
It appears Chipotle is drumming up this growth in a way that helps position it for a more digital-centric future. The company said digital sales in the fourth quarter surged nearly 66 percent from a year earlier, and accounted for 13 percent of sales overall during the period. That’s been facilitated by smart but simple steps for improving the customer experience in this format, such as adding second “make lines” for assembling burritos that were ordered online, and outfitting 1,000 stores with designated pick-up shelves for mobile orders.
There are still some aspects of Chipotle’s strategy that I have reservations about, including its guidance that it intends to open 140 to 155 new restaurants next year. Given its plans to grow via off-premise dining options such as delivery, I question whether it needs to ramp up its store openings. (In the year that just ended, Chipotle open 137 new restaurants and closed or relocated 54 of them.) And given that it still has room to improve at the restaurants it has now, such as serving more customers by moving lines faster, can’t it wring sales more profitably out of its existing fleet?
That said, these latest results are a nice feather in CEO Brian Niccol’s cap on the almost-one-year anniversary of his being named to the top job. I noted at the time of his appointment that he was an excellent fit for the position. He had helped blaze the e-commerce trail at Yum Brands Inc.’s Taco Bell, and was a seasoned leader of a sprawling organization who knew how to bring operational discipline to a company that badly needed it.
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Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
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