Chipotle (CMG) on Wednesday posted a first-quarter revenue report that exceeds market expectations, and the fast-food giant’s digital sales have more than doubled as app purchases surpass in-person purchases.
This is what the California company reported, compared to Wall Street’s expectations, according to a Bloomberg consensus estimate:
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Income: $ 1.74 billion against $ 1.75 billion expected
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Adj. earnings per share (EPS): Expected $ 5.36 vs. $ 4.91 per share
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Sales in the same store: 17.2% versus 17.18% expected
Compared to a year ago, digital sales grew to $ 869.8 million and were primarily driven by guest transactions and the addition of ‘Chipotlanes’. In fact, the digital purchase was spurred by COVID-19 social distance which makes up 50.1%. of sales.
“As vaccines expand and we move closer to moving past this pandemic, I believe Chipotle is well positioned for growth,” Brian Niccol, chairman and CEO of Chipotle, said in the report.
“I’m excited about our future as we remain focused on culinary innovation, with food with integrity and easy access to our restaurants and through our growing digital ecosystem,” he added.
Chipotle’s share, which closed more than 1% lower at 1,507.62 on Wednesday, rose modestly in after-hours trading.
This past quarter, the company launched the Handmade Quesadilla, but eaters can only order it online. The move is part of an effort to build customer loyalty with a combination of cheap meals and app-based offerings.
The first quarter hosted a number of initiatives specifically designed to address Gen Z consumers. In March, the company announced a partnership with Eleven Beauty (ELF) to launch a makeup collection called ‘Eleven x Chipotle’, which includes a makeup set with names designed to refer to Chipotle’s menu.
Chipotle followed suit with an attempt to ride the Bitcoin bonanza with plans to give away $ 100,000 free burritos and $ 100,000 in Bitcoin (BTC-USD), coinciding with another holiday on April 1: National Burrito Day.
‘Middle stages’ of a turnaround
This report comes because Wall Street was eager to learn whether a combination of new menu items and digital bargains aimed at younger consumers could maintain the momentum that drove the company through the COVID-19 crisis.
These factors have indeed worked to Chipotle’s advantage. During the quarter, the company opened 40 new restaurants, of which 26 ‘Chipotlanes’ drive through, while five closed, bringing the total restaurant count to 2,803.
In a note earlier this month, John Ivankoe of JP Morgan remains neutral on Chipotle, with a price target of $ 1,460.00. He expects the company to place double-digit retail margins on $ 20 billion in sales, but does not see much impetus for a big step higher.
“Chipotle still has the opportunity to grow competitions in the full year 2021, due to the reopening of the dining rooms and prices,” the analyst said. “It looks like the company is ‘teasing’ some higher-income targets in the United States.”
Still, BTIG’s Peter Saleh is more positive on the stock, repeating it last month as a ‘buy’ with a price target of $ 1,600, which is largely due to the potential of the quesadilla.
“We believe that the launch of Quesadilla will contribute to the continued sales momentum in the same store and that it will support a healthy digital sales mix. We expect this product to attract new customers to the brand as it was the most sought after menu with more as 20 million unfinished products. orders per year, “ultimately expanding the customer base, the analyst wrote.
Saleh added that he sees the food chain in the “middle stages” of its economic turnaround, as it appears to be coming again due to the coronavirus pandemic.
Nicholas Johnson of Morningstar is also optimistic about the long-term potential of the fast-paced informal chain. In a note from earlier February, following Chipotle’s earnings in the fourth quarter, he noted: “In our view, it is clear that [Niccol] has restored Chipotle’s foundation and placed the company on a growth front for years to come. ‘
Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].
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