Please ensure Javascript is enabled for purposes of website accessibility

Why Chipotle Mexican Grill's Stock Rose 13.4% in August

By Royston Yang – Sep 8, 2020 at 9:31AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The restaurant chain has successfully leveraged digital sales to ride through the pandemic.

What happened

Shares of Chipotle Mexican Grill (CMG 1.65%) rose 13.4% in August, according to data provided by S&P Global Market Intelligence.

The casual dining restaurant chain's shares have risen 52.7% year to date and continue to hit new all-time highs.

Three tacos sitting on a wooden board with lime beside them.

Image source: Getty Images.

So what

Chipotle is one of the few restaurant chains that has managed to successfully pivot to digital sales during the pandemic, even as around 30 restaurants remained temporarily closed as of the end of July. For the company's second quarter, revenue declined by 4.8% year over year while comparable restaurant sales fell by 9.8% year over year. However, digital sales grew by an impressive 216.3% year over year and represented 60.7% of sales for the quarter.

Comparable-store sales hit their nadir during April at negative 24.4% year over year, but steadily improved over the months to end at positive 2% in June. Chipotle also opened 37 new restaurants during the quarter, taking advantage of the downturn to continue its growth path. Digital awareness was enhanced through advertising as well as new delivery partnerships with Grubhub and Uber Technologies' Uber Eats. 

CEO Brian Niccol mentioned on the company's latest earnings call that Chipotle has been able to retain around 70% to 80% of its digital sales gains while recovering around 40% to 50% of in-store sales. It's great news for investors, as this means the company is enjoying the best of both worlds: garnering new customers through its digital presence and enjoying the slow recovery for restaurant dine-ins.

Now what

Chipotle intends to work on its goal of having two new menu items per year now that reopenings have given the company a chance to test out new items again. Its rewards program has grown to nearly 15 million members after being launched just 15 months ago, and the rate of enrollment has almost doubled during the period that overlapped with the COVID-19 pandemic.

This platform helps the company to analyze transaction data from customers and allows Chipotle to send out personalized promotions to drive more frequent purchases for a larger average basket size. With the company's strength in building up its digital channels, investors should expect more good news from the company in the coming quarters.

Royston Yang has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Chipotle Mexican Grill. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Chipotle Mexican Grill Stock Quote
Chipotle Mexican Grill
CMG
$1,552.72 (1.65%) $25.16
Grubhub Stock Quote
Grubhub
GRUB
Uber Technologies Stock Quote
Uber Technologies
UBER
$27.76 (%)

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.