A customer carries a Chipotle Mexican Grill Inc. bag outside a restaurant in San Francisco, California, U.S., on Monday, July 20, 2020.
David Paul Morris | Bloomberg | Getty Images
Chipotle Mexican Grill on Thursday reported quarterly earnings that crushed Wall Street’s estimates as its menu price increases helped the chain weather higher costs.
Shares of the company rose more than 1% in extended trading.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
Earnings per share: $7.02 adjusted vs. $6.32 expectedRevenue: $1.95 billion vs. $1.94 billion expected
The company reported fiscal third-quarter net income of $204.4 million, or $7.18 per share, up from $80.2 million, or $2.82 per share a year earlier.
Beef and freight costs were higher, but menu price hikes offset the impact of those increased expenses. In June, the chain announced that menu prices would rise by roughly 4% to cover the cost of hiking restuarant workers’ wages to an average of $15 an hour.
Excluding a tax benefit, restructing costs and other items, Chipotle earned $7.02 per share, topping the $6.32 per share expected by analysts surveyed by Refinitiv.
Net sales rose 21.9% to $1.95 billion, beating expectations of $1.94 billion. Same-store sales climbed 15.1%, topping StreetAccount estimates of 14%.
Digital sales increased by 8.6% after more than tripling a year ago. The company’s loyalty program has gained 24.5 million members in two and a half years, helping Chipotle learn more about its customers and encourage more frequent visits.
“There is no doubt that the loyalty program has moved from the crawl to the walk stage, and we still have a lot of room to grow,” CEO Brian Niccol said on the conference call.
Chipotle is still experiencing some staffing challenges amid the labor crunch that’s hitting the broader industry. But Chief Technology Officer Curt Garner said in an interview that Chipotle was able to keep that from hitting its sales for the most part by keeping its restaurants open. When a location is understaffed for a shift, it can turn off its digital orders to focus on in-restaurant transactions. Delivery orders will be fulfilled by a nearby restaurant, while digital customers looking to pick up their orders will be directed to order from a nearby location instead.
At the tail end of the quarter, the chain launched smoked brisket as a limited-time menu option. Strong demand for the item means that its availability will end in November, slightly earlier than initially planned. Under Niccol, who previously led Yum Brands’ Taco Bell, the company has accelerated adding new menu items through a process it calls stage-gate testing. The chain has been strategic with new releases, making many of them limited-time options to drive customer traffic to its restaurants and to keep the menu from becoming bloated.
The company opened 41 new restaurants during the quarter. Only five of those locations did not include a “Chipotlane,” a drive-thru lane designated for picking up digital orders. Executives said that the company is still dealing with inflation on construction materials, shortages on subcontractor labor and equipment and landlord delivery delays.
Looking ahead to the fourth quarter, the company is projecting same-store sales growth in the low-to-mid double-digits range. Chipotle did note several uncertainties weighing on the business, like inflation, staffing pressures and Covid-19.
“Despite these challenges we remain confident in our ability to drive restaurant margins higher as our average unit volumes increase,” CFO Jack Hartung said.
Chipotle also announced its board had approved an additional $100 million in stock buybacks, bringing its total authorization to $209.8 million as of Sept. 30. The company repurchased $98.7 million in stock during the third quarter.