As if Chipotle Mexican Grill's (CMG +1.62%) strong first half of 2019 wasn't already impressive enough, the fast-casual restaurant saw accelerated momentum in its third quarter, with its year-over-year growth rate for both revenue and comparable-restaurant sales coming in higher than in Q2. Furthermore, this was the company's seventh quarter in a row of accelerating comps growth.
Here's a close look at the results -- and how Chipotle crushed analyst forecasts for the period.
Chipotle online order bag. Image source: Chipotle Mexican Grill.
Strong growth
Chipotle's third-quarter revenue jumped 14.6% year over year in Q3 -- an acceleration compared with 13.2% growth in Q2. This growth was driven by an 11% increase in comps, or sales at restaurants in operation for at least 13 months. This was also an acceleration from 10% growth in Q2.
Commenting in its third-quarter report on its strong comps growth, management said the key metric "improved due to a nearly 7.5% increase in comparable restaurant transactions and a 3.5% increase in the average check, which includes a benefit from menu price increases that were implemented during 2018."
|
Metric |
Q3 2019 |
Q3 2018 |
Change |
|---|---|---|---|
|
Revenue |
$1.40 billion |
$1.23 billion |
15% |
|
Adjusted earnings per share |
$3.82 |
$2.16 |
77% |
|
Restaurant-level operating margin |
20.8% |
18.7% |
210 basis points |
Data source: Chipotle.
The company's performance easily beat analyst estimates. Revenue came in at $1.4 billion -- ahead of an average forecast for $1.38 billion. Adjusted earnings per share jumped 77% year over year to $3.82, beating a consensus estimate for $3.22.
Helping the company's earnings was a significant boost to its restaurant-level operating margin. The key metric widened to 20.8%, up from 18.7% in the third quarter of 2018 and 16.1% in the third quarter of 2017.
Importantly, Chipotle said its digital sales jumped 87.9% year over year during the period, putting total digital sales at 18.3% of revenue.
Looking ahead
Given Chipotle's stronger-than-expected comparable-restaurant sales growth in Q3, management lifted its full-year outlook for the metric. Previously, the company was expecting growth in the high single-digit percentage range. But now management expects this growth to be at the top end of this guidance range, presumably somewhere between 8% and 9.9%.
The company also noted that the success it has seen with its drive-thru Chipotlanes has prompted it to adjust its real estate strategy to look for more locations that can accommodate them. As a result, the longer construction timeline associated with Chipotlane-equipped restaurants means some of the company's new restaurant openings will shift from Q4 to early next year. To this end, the company says its total restaurant openings in 2019 will be equal to or slightly below the bottom of its guidance range for 140 to 155 openings.
But management added that it expects to open 150 to 165 restaurants in 2020.
