Expectations were high going into the second-quarter earnings release of Chipotle Mexican Grill (NYSE:CMG). Not only was the stock up more than 70% going into the quarterly update, but the company announced in February that it had returned to growth in comparable-restaurant transactions, and overall comp sales have since accelerated.
After market close on Tuesday, the fast-casual restaurant chain showed that the momentum continued in its second quarter. The company saw double-digit growth in revenue as comps and digital sales nearly doubled.
Here's a closer look at the quarter.
Chipotle's second-quarter revenue increased 13.2% year over year to $1.43 billion, beating analysts' average forecast for revenue of $1.41 billion. Non-GAAP (adjusted) earnings per share for the period were $3.99, easily beating analysts' consensus estimate of $3.75. Capturing the strong financial momentum recently, the chain's adjusted earnings per share were up 39% year over year.
Second-quarter top-line strength was helped by 19 net new restaurant openings (20 new locations and one closed location) and a 10% increase in comps. Growth in this metric was well ahead of analysts' average forecast for 8.3% comps growth. Management said 7% of this growth was driven by an increase in the number of transactions at stores open at least 13 months. The rest of Chipotle's comps growth was driven by a 3.5% boost in the average check size.
Also driving revenue was a 99.1% year-over-year increase in digital sales, in line with strength seen in the metric in recent quarters.
Higher sales at stores open more than 13 months helped Chipotle benefit from operational leverage, contributing to earnings growth. The company's restaurant-level operating margin expanded from 19.7% in the second quarter of 2018 to 20.9%.
"These strong results were delivered despite a tougher year-over-year comparison and benefited from better restaurant operations, more effective marketing, and leveraging our digital make line to grow sales and expand access," said CEO Brian Niccol in the company's second-quarter earnings release.
Lifting its guidance
Making the quarterly report even better, management raised its outlook for the full year. The company said it now expects 2019 full-year comps to rise at a rate in the high single digits year over year. This is up from a previous forecast for revenue to rise at a rate in the mid to high single digits.
Clearly, management anticipates its strong momentum in the first half of the year will continue in the second half.