Chipotle (CMG) released a first-quarter earnings report on Wednesday that outperformed market expectations, with the fast-food giant’s digital sales more than doubling as pandemic app purchases overtook personal purchases.
Here’s what the California-based company reported, compared to Wall Street’s expectations, according to a Bloomberg consensus estimate:
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Revenue: $ 1.74 billion vs. $ 1.75 billion expected
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Adj. earnings per share (EPS): $ 5.36 versus $ 4.91 per expected share
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Sell in the same store: 17.2% versus 17.18% expected
Compared to a year ago, digital sales grew to $ 869.8 million and were mainly driven by order-ahead transactions by guests and the addition of drive-through “Chipotlanes”. In fact, digital buying spurred by COVID-19 social distancing accounts for 50.1% of sales.
“As vaccines hit the market and we get closer to this pandemic, I think Chipotle is well positioned for growth,” said Brian Niccol, Chipotle Chairman and CEO in the report.
“I am excited about our future as we remain focused on culinary innovation, lead food with integrity and provide easy access in our restaurants and through our growing digital ecosystem,” he added.
Chipotle’s stock, which closed more than 1% lower at 1,507.62 during Wednesday’s session, rose modestly during out-of-hours trading.
In the past quarter, the company introduced the handmade quesadilla, but guests can only order it online. The move is part of an effort to increase customer loyalty with a combination of cheap eats and app-based deals.
The first quarter saw a number of initiatives specifically designed to target Gen Z consumers. In March, the company announced a partnership with Elf Beauty (ELF) to offer a makeup collection called ‘elf x Chipotle’, which includes a makeup kit with names designed to refer to the menu from Chipotle.
Chipotle then followed with an attempt to ride the Bitcoin bonanza with plans to give away $ 100,000 in free burritos and $ 100,000 in Bitcoin (BTC-USD), coinciding with another April 1 holiday: National Burrito Day.
‘Middle phases’ of a turnaround
This report is because Wall Street was keen to know if a combination of new menu items and digital bargains targeting younger consumers could support the momentum propelled the company through the COVID-19 crisis.
Indeed, those factors worked in Chipotle’s favor. During the quarter, the company opened 40 new restaurants, 26 of them with drive-thru ‘Chipotlanes’, while five locations closed – bringing the total number of restaurants to 2,803.
In a note earlier this month, JP Morgan’s John Ivankoe remains neutral on Chipotle with a target price of $ 1,460.00. He expects the company to achieve double-digit retail margins at $ 20 billion in sales, but doesn’t see much of an incentive for a major step up.
“Chipotle still has the opportunity to grow through the full year of 2021 thanks to dining rooms reopening and pricing,” said the analyst. “The company appears to be” teasing “some of the higher revenue targets in the United States.”
Still, BTIG’s Peter Saleh is more bullish on the stock, repeating it last month as a “Buy” with a price target of $ 1,600, largely against the quesadilla’s potential.
“We believe the launch of Quesadilla will translate into continued momentum of in-store sales and support a healthy digital sales mix. We expect this product to attract new customers to the brand as it becomes the most in-demand menu item. is with more than 20 million unfilled orders per year, “ultimately expanding the customer base, the analyst wrote.
Saleh added that he sees the food chain in the ‘mid-stage’ of its economic turnaround as it appears to be recovering from the coronavirus pandemic.
Morningstar’s Nicholas Johnson is also optimistic about the fast-casual chain’s long-term potential. In a note from earlier February, following Chipotle’s fourth-quarter earnings, he notes, “In our opinion, it is clear that [Niccol] has restored Chipotle’s foundation and positioned the company for growth above the industry for years to come. ”
Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or send an email to [email protected].
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