Chipotle Mexican Grill is rising late Tuesday, as the burrito chain turned in an upbeat fiscal second quarter. Its chief financial officer says he is optimistic about the company's strengths as he looks forward to a postpandemic world.
Chipotle (ticker: CMG) said it earned $188 million, or $6.60 per share, up from 29 cents a share in the pandemic-impacted year-ago period. Excluding nonrecurring items such as restaurant closure and asset impairment costs, adjusted earnings were $7.46 a share. Revenue rose 38.7% to $1.9 billion. Analysts were looking for EPS of $6.53, on revenue of $1.88 billion.
Same-store sales climbed 31.2%, above the 30% consensus estimate. Digital sales grew 10.5% and accounted for 48.5% of sales. Chipotle opened 56 new restaurants in the quarter, while closing five; 45 of the new locations include a Chipotlane drive-through.
Chipotle is up 4.3% to $1,642 in late trading.
CFO Jack Hartung spoke with Barron's following the results, saying that he is most proud of Chipotle's ability to maintain high digital sales even as restaurant dining rooms reopened. He notes that the comparable sales gain was largely driven by the return of indoor dining, and that Chipotle is seeing strong business in urban locations, during lunchtime hours in many locations, and daily Monday through Friday.
While the Delta variant of Covid-19 remains a challenge, he says that "what we had hoped what happened is happening—we're holding onto these digital transactions while people's previous habits are returning when they feel comfortable going out and about."
He also highlighted the company's growth of Chipotlanes, providing "customers with the channels that they want." The pandemic introduced many diners to new ways to enjoy the brand, and recent results show that they continue to prize flexibility.
Chipotle recently implemented price increases intended to offset higher employee wages . Hartung says that the company's management team recognized early on that the move to higher pay wasn't a short-term trend, and moved quickly to offer competitive compensation—"a very bold move," but one that has paid off, to the point that Chiptole is "in as good or better shape than pre-Covid" in terms of staffing.
Moreover, while the change has put some pressures on margins, restaurant-level operating margin was 24.5%, the highest since the third quarter of 2015. Hartung says Chipotle "has always been a company that thinks long term, making investments in people, sustainable ingredients, and tech. So to have margins near a six-year high is a tribute to our people in the field, who have done the right thing for our employees and customers."
Ultimately, Hartung says that "when a company goes through a challenge like Covid, it defines your capabilities. Up and down the company, people rose to the occasion and showed that our purpose isn't just words written on a wall in an office; it's been embraced and our people really stood up, navigated, and pivoted in any way they needed to. To come out of the pandemic stronger than we entered—that leaves me with a lot of optimism about the future."