By the looks of the Street's response to Chipotle Mexican Grill's (NYSE:CMG) fourth-quarter update, the company seems to have announced lackluster results for the period. Shares of the fast-casual burrito chain fell about 3.5% on Wednesday, following its quarterly update.
But an examination of Chipotle's fourth-quarter results reveals more strong momentum for the company, with comparable restaurant sales growth accelerating for the eighth quarter in a row. Chipotle's investments in digital efforts, operational efficiency, and menu innovation continued to pay off as the company wrapped up a year of 15% revenue growth and a 55% increase in adjusted earnings per share.
Here's a closer look at some of the key takeaways from the quarter.
Revenue during the period jumped 17.6% year over year to $1.44 billion, marking a meaningful acceleration from 14.6% revenue growth in Q3. Furthermore, the restaurant company's non-GAAP (adjusted) earnings per share notably rose 66.3% year over year to $2.86.
The burrito maker's impressive business momentum was fueled by a 13.4% increase in comparable restaurant sales, higher than 11% and 10% growth rates in the third and second quarters of 2019, respectively.
"The Q4 comp at 13.4% was driven by an acceleration in transactions as 8% of the comp came from greater guest visits," explained Chipotle CFO John Hartung in the company's fourth-quarter earnings call. Comparable restaurant sales also benefited from a 5.4% year-over-year increase in check amounts.
Chipotle's menu and digital innovations are working
Highlighting the company's continued strong execution under CEO Brian Niccols, the company said two of its investment areas helped drive its 5.4% increase in check amounts: the rollout of its new carne asada ingredient and growth in digital sales.
Digital sales, in particular, continued to be a key highlight for the company. Digital sales rose about 78% year over year and accounted for nearly 20% of sales during the period.
"Over the course of 2019, we significantly upgraded our [digital] capabilities by completing the rollout of digital pickup shelves, digitizing our digital make line, and expanding our delivery capabilities to over 98% of our store base," explained Niccol in the company's earnings call.
Strong momentum going into 2020
During the company's earnings call, management acknowledged that it is up against some tough comparisons, with comparable restaurant sales for the full year of 2019 rising 11.1% year over year. But management said "healthy sales trends" so far in the first quarter of 2020, a recent price increase, and growth initiatives for 2020 (including the launch of more Chipotlane drive-throughs) are expected to fuel mid-single-digit comparable restaurant sales growth in 2020.