Chipotle Mexican Grill Inc.
Its largest quarterly sales, as online orders reported, helped offset lost restaurant traffic during the coronovirus epidemic, though the shift created costs that are weighing on profits.
Chipotle has benefited from increased sales during the epidemic in search of convenient food to consumers. The Newport Beach, California.-based Burrito chain said Wednesday that same-store sales increased 8.3% in the third quarter from the previous year, a 7.3% increase over analysts. Digital transactions, which tripled, accounted for nearly half of the company’s revenue.
Nevertheless, costs, including restructuring and legal expenses, were weighed on profits. Chipotle’s earnings, at net income of $ 80 million, were $ 2.82 per share, down from $ 3.47 during the prior-year period. Revenue in the quarter was $ 1.6 billion.
Chipotle shares fell 4% to $ 1,307 in aftermarket trading. The stock was up 63% year-to-date as of Wednesday’s close. Chipotle declined to provide guidance for same-store sales and new openings for its fiscal year, citing the ongoing uncertainty surrounding the epidemic.
Chipotle and other restaurants incur delivery costs during the epidemic at the time of delivery as more sales occur outside the dining room. Distribution companies often charge double-digit commission on food sales to handle those orders, prompting many restaurants to encourage their customers to pick up food.
Chipotle tested higher prices for goods delivered during the quarter, a premium of 13% to 17% in some market tests. The chain reduced its distribution surcharges during the epidemic, but said it wanted to follow rivals in rising prices to go to offset costs. The company said that customers paid a two to three percent premium on average delivery through new menu prices.
“A lot of people are pricing too much from us in the delivery channel,” CEO Brian Nicol told investors.
The chain is also creating new locations, as thousands of independent restaurants are closing their doors as an epidemic wiped out their foodie business. Chipotle added 44 restaurants during the quarter, including 26 drive-throughs. Drive-throughs are oriented toward online orders, known as chipotlens, on average higher sales than the chain’s traditional locations, Chipotle said.
Chipotle’s margins improved from the second quarter, but fell below the prior-year period as it paid for coronovirus-related expenses and increased costs related to delivery sales and elevated beef prices. Chipotle also stated that it sells low-high-beverages, a trend among many restaurants to operate primarily during the epidemic.
Earnings adjusted for a one-time expense of $ 3.76 exceeded analyst expectations of $ 3.47 a share.
Write Heather Hayden at [email protected]
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On 22 October 2020, the print edition appeared as ‘Chipotle Web Sales Set Record but High Costs Hurt Earning’.