Chipotle Mexican Grill
is falling 4% in late trading, despite a better-than-expected third quarter. Its CEO tells Barron’s that the burrito maker’s recent success is a window into the restaurant’s future, powered by ongoing investments in technology and ethical food.
Chipotle (ticker: CMG) said it earned an adjusted $3.76 a share, on revenue that rose 14.1% to $1.6 billion. Analysts were looking for Chipotle to earn $3.47 a share on revenue of $1.59 billion.
Chief Executive Officer Brian Niccol spoke with Barron’s after the company’s conference call, highlighting the company’s ability to execute despite the headwinds that the Covid-19 pandemic has presented. Chipotle notched record sales, with two-year comparable sales up over 20% on a compound basis; it ended the quarter with more than $1 billion in cash on its balance sheet, while its digital and delivery sales soared.
He said the company’s “digital drive-through experience is proving to be a big win with customers, a big win financially,” and is a model that exemplifies the company’s move into the future. Pre-pandemic, digital sales were about a fifth of the business, while today that figure is nearly half; looking ahead he thinks “Chipotle is going to be an off-premise restaurant just as much as it is an in-store” eatery.
“The restaurants that will have relevance in the future have to have delicious food done the right way, with customers able to access the food any way they want to. We’re very fortunate to be well positioned in a differentiated way” in this regard, he said.
“What separates us is that we’re trying to change the future by offering food with integrity,” which encompasses everything from animal welfare to regenerative farming practices, he said. “It’s not how you get it done, it’s the fact that you do it in the right way.”
While the Covid crisis has upended the industry, Niccol is looking forward to Chipotle’s ongoing growth strategy, targeting more store openings next year, as well as its investment in technology, which has put it ahead of peers.
Chipotle stock has soared more than 63% in 2020, making it one of the best performers in the industry, and raising some concerns about its valuation. Niccol declines to speculate about the stock’s rally, but said that “Chipotle is a special growth company, and as long as we demonstrate that that growth can come in a smart way—that it comes with impressive financial returns—I believe we’ll continue to be rewarded with a strong multiple and stock performance.”
Ultimately, he said Chipotle’s commitment to its values, manifest by its investment in employees, technology, and stores (which it hopes to double in the U.S.), will be the linchpin of its continuing success. “We’re not going to slow down.”
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