Chipotle Mexican Grill saw a 177.2 percent year over year increase in digital sales to $781.4 million in the fourth quarter, the company reported on Tuesday (Feb. 2), continuing its rapid digital growth pattern, though falling short of Q3’s 202.5 percent increase. Digital sales accounted for almost half of all sales, and these were split about 50-50 between delivery and pickup. The chain’s $3.48 earnings per share outperformed the previous quarter but fell short of the Zacks consensus estimate of $3.70.
In the first quarter of 2021, the restaurant chain will continue to invest in its digital platform. “Looking ahead to Q1, we expect underlying G&A expense to carry forward in the $90 million range,” said Chief Financial Officer Jack Hartung on an earnings call with analysts. He added that the majority of this spending would go toward “revenue-generating” investments “that bolster our expanding digital and loyalty platform” such as consumer-facing app changes and internal efficiency tools.
Much of the digital order-ahead option’s success comes from the new Chipotlanes, drive-thru lanes where customers can pick up their mobile orders. “While 62 percent of new restaurants in 2020 had a Chipotlane, our goal is to have more than 70 percent of openings include Chipotlanes in 2021, where we anticipate opening around 200 new restaurants,” said Hartung, citing non-comp Chipotlane sales in the mid-to-high 80 percent range, measured against “historical peak productivity,” as examples of the lanes’ success.
Given this high performance, the chain will be trying out more digital-order-centric store designs. CEO Brian Niccol said on the call, “You’ll see us experimenting with digital-only [restaurants], you’ll see us experimenting Chipotlanes-only.” The chain has already debuted its first digital-only kitchen in Highland Falls, New York, just outside the gates of West Point military academy. The digital-only kitchen takes orders only on the Chipotle app, website or via a third-party delivery service. The consumer-facing pickup space, however, looks, feels and smells like a typical Chipotle restaurant.
In addition to pickup-friendly store design, Chipotle is also driving digital orders through its loyalty rewards program, which grew by 10 million users over the course of the year, and now has about 19.5 million enrolled members. About 60 percent of these members are active users. “Those are the folks that we’ve got an ongoing program with,” said Hartung, as well as targeted initiatives to encourage non-active users to reengage. Hartung described recent upgrades to the program, saying, “We have focused on strengthening our creative analytical capabilities by using predictive modeling to ensure that our members feel known and valued as we elevate the relationship with Chipotle … In addition, we reach customers with dedicated journeys focused on welcoming new members, growing frequency and minimizing lapsing behavior.”
PYMNTS featured Chipotle’s industry-leading rewards program in our December Order to Eat Tracker. Nicole West, vice president of digital strategy and product management, explained how localizing loyalty programs and customizing the ordering experience helps the chain capitalize on rising digital sales. On the call, Niccols alluded to “further enhancements planned in the coming months that we expect will continue to drive frequency increases across our customer segments.”
While the majority of the call focused on Chipotle’s domestic performance, Niccols did mention, in response to a question about global opportunities, that the chain is “already seeing some success in Canada.” He added that the company had a “foot in the door” in the United Kingdom and in France. “We’ve not made decisions on how we want to enter those other markets,” said Niccols, “and frankly, we haven’t laid out exactly the order of how we’re going to do it.”
Over the course of 2020, Chipotle opened 161 new restaurants and closed nine. The chain’s total revenue increased 11.6 percent to $1.6 billion during the fourth quarter and 7.1 percent to $6 billion for the whole year. Comparable restaurant sales increased 5.7 percent for the quarter and 1.8 percent for the year.