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Chipotle CEO Brian Niccol: ‘We were definitely visible this quarter’

Visits grow, same-store sales jump 9.9% on cultural reset of the brand

Chipotle Mexican Grill is no longer hiding.

CEO Brian Niccol’s recovery plan for Chipotle Mexican Grill was simple: shine a bright light on the brand by reminding consumers why they love it and providing them the digital channels necessary to create their favorite meal.

In the latest quarter, those year-long strategies came together to produce smashing results for the Newport Beach, Calif.-based fast-casual chain. For the first quarter ended March 31, Chipotle reported a 100.7% increase in digital sales - a sizeable jump driven by delivery, a new loyalty program and online-only menu innovations.

“We were definitely visible this quarter,” said Niccol, who’s led the chain since March 2018. “The strategies that we outlined over a year ago, we’re starting to see the impact of the execution around that strategy.”

CMG-QUICKPICKUPSHELVESNB-CREDITNANCYLUNA.jpgSame-store sales for the first quarter increased 9.9%, compared to a 2.2% gain for the same period last year.  

“What we are seeing is consumers love the app experience. They love the new website experience. And that’s resulting in them committing more and more to this easier access approach,” Niccol told investors during a Wednesday afternoon conference call.

Sales were driven primarily by a 5.8% increase in transactions -- an enviable number as the industry faces flat to negative guest counts.  Same-store traffic at chain restaurants was down 1.8% during March, while traffic growth for the first quarter of 2019 was down 2%, according to the latest TDn2K Black Box Intelligence data.

Niccol said consumers are responding to speedy delivery times, the introduction of online-only Lifestyle Bowls and the chain’s new loyalty program. The points-based Chipotle Rewards program launched in March and has already enrolled 3 million members. 

“Rewards add another level of engagement in the system,” he said.

As the brand builds enrollment, Niccol said the chain will leverage data from members to “incentivize” repeat business based on their buying behaviors.

“We’re just getting started with enrollment and we’re frankly just getting started with targeted marketing,” Niccol said.

For the quarter, digital sales, which includes delivery, accounted for 15.7% of total sales, or $206 million. The company is logging about 1 million digital transactions per week.

Chipotle “food really travels well” and arrives, on average, in just under 30 minutes, Niccol said.

Behind the scenes, restaurants have moved quickly to improve speed, convenience and order accuracy through the installation of quick pick up shelves and digital second make lines.

Quick pick shelves, installed at all 2,500 locations, provide convenience for both DoorDash drivers and consumers looking to fetch takeout orders without waiting in line.

“We feel this is a competitive advantage,” Niccol said. “We’re removing a lot of obstacles for you.”

About 1,300 stores also have digital make lines. Those tech-enabled food assembly counters are outfitted with digital screens that light-up to show only the ingredients needed to make an incoming order. The ingredients on display are also listed in the same order as the corresponding food bins, which help with speed and accuracy. 

A complete roll out is expected by the end of the year.

Niccol said Chipotle is also solving “people’s needs for how they want to eat today and in the future.”

At the start of the year, the company introduced “Lifestyle” and “Plant-Powered” bowls —entrees made with specific ingredients that match the requirements of trendy diets such as paleo, keto and Whole30.

Niccol said “smart menu innovation” along with the brand’s new “For Real” and “Behind the Foil” campaigns are reminding guests why they love Chipotle – its real ingredients and real cooking techniques.

“That is coming through loud and clear,” he said.

For the quarter, revenue increased 13.9% to $1.3 billion. Net income grew 48.3% to $88.1 million, or $3.13 per share, compared to $59.4 million, or $2.13 per share, in the same quarter last year. 

“We believe the company's cultural reset and heightened level of accountability are critical drivers of ongoing and future performance,” Piper Jaffray analyst Nicole Miller Regan said in a post conference call research note.

The company opened 15 restaurants and closed two in the quarter, bringing its total to 2,504 locations.   

Contact Nancy Luna at [email protected]

Follow her on Twitter @FastFoodMaven

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