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Chipotle Management Talks Digital Sales, Marketing, and Second Make Lines

By Daniel Sparks – May 13, 2019 at 6:32PM

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Check out these three must-see quotes from Chipotle's earnings call.

If there were any doubts left about Chipotle Mexican Grill's (CMG -1.95%) ability to turn around its business under new CEO Brian Niccol, those worries would be hard to justify following the company's most recent earnings report. The fast-casual restaurant company reported stellar first-quarter results, featuring a significant acceleration in comparable sales growth.

Key stats from the quarter include a 13.9% year-over-year increase in revenue, 9.9% comparable restaurant sales growth, and a 59.6% boost to non-GAAP earnings per share. But investors who want to fully understand Chipotle's turnaround should look beyond these headline figures. More interesting insights can be found in Chipotle's earnings call, where management discussed a range of topics, including marketing performance, digital sales growth, and second make lines.

Here are three key quotes from the call.

Chipotle burrito, chips, and guacamole

Image source: Chipotle Mexican Grill.

Marketing is paying off

In 2018, Chipotle's evolved omnichannel marketing strategy, with a particular emphasis on digital, was a key driver for the burrito chain's business. Best of all, the company was able to improve its marketing without increasing its marketing spend.

Chipotle continues to succeed with its refreshed marketing strategy, explained CEO Brian Niccol in the company's first-quarter earnings call:

And finally, we continue to drive awareness of our brand through a holistic media plan with national TV advertising on culturally relevant programming like March Madness, and always on social media that resonates with our guests. Collectively, these marketing efforts help drive culture, drive a difference and ultimately drive its Chipotle purchase. This contributed to the lift in Q1 sales as evidenced by digital impressions increasing 300% year over year and social impressions increasing 400% year over year.

Looking ahead, Niccol said he expects more strong return on investment on its marketing dollars throughout 2019.

Digital sales are soaring

Under Niccol's leadership, Chipotle continues to invest in initiatives aimed to boost digital sales. The company went into the year planning to invest about $90 million on growth initiatives, with digital being a key emphasis.

Investments in digital are paying off handsomely, Niccol explained:

Through a combination of delivery, order ahead, and catering, our digital sales accelerated from Q4 and grew 101% year over year and quarter one. Digital sales totaled $206 million during the quarter and represented 15.7% of sales. We also relaunched a new website in February that's helping increase customer conversion. We are pleased to be averaging more than 1 million digital transactions per week.

Improved capabilities of Chipotle's website and app to make delivery easier have made delivery, in particular, an important driver for Chipotle's digital growth, Niccol added.

Second make lines are working

As part of Chipotle's digital efforts, the company is equipping stores with second make lines, or buffets like the ones at the front of the store but for digital orders only. These lines, along with dedicated mobile-order pick-up shelves to make picking up mobile orders seamless, have been a success.

"Early results are showing that restaurants with mobile order pickup shelves and digital make lines generate digital sales above our national average," Niccol said.

Chipotle is wasting no time rolling out these second lines. Digital make lines are now at 1,300 restaurants, up from about 1,000 in February. Niccol said the company plans to have them in all of its relevant restaurants by the end of the year.

Daniel Sparks has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

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