Chipotle Mexican Grill (CMG -0.39%) is thriving. As part of its quarterly earnings report, the Mexican restaurant chain told investors that it thinks there is room for 7,000 Chipotle locations in North America.
That was 1,000 higher than it had previously estimated. The announcement comes as the fast-casual eatery has been adjusting well to changing consumer habits since the pandemic's onset.
Image source: Getty Images.
Chipotle will add more restaurants -- and faster
To feed the growing demand for its menu items, Chipotle is adding more locations. In 2021, the restaurant chain grew its total number of restaurants by 215 -- an impressive feat considering the widespread shortages of labor. To open each location, you need to secure sufficient staffing. Investors had feared Chipotle would experience more significant headwinds considering labor and commodity shortages and rising costs, but that scenario has not played out.
"2021 was an outstanding year for Chipotle, highlighting the strength and resiliency of our brand. Together, we accomplished many incredible things as our passionate employees remained dedicated to delivering excellent guest experiences, aligned with our purpose and values," said Brian Niccol, Chairman and Chief Executive Officer of Chipotle.
"Moving forward, we believe expanding access and convenience through our digital ecosystem, accelerating unit growth, and continuing to develop and support our restaurant employees, will put us in a much stronger competitive position," he added.
Not only is Chipotle raising the long-term goal for total restaurants, it's also increasing the pace of development. Chipotle said it plans to add new units at a rate of 8% to 10% per year. As of Dec. 31, it had 2,950 locations. So at a 10% rate, that could mean adding 295 units per year. Before this most recent update, management had been targeting annual unit growth of 200. The company highlighted in particular its success in small-town locations.
Its digital business is helping out too
In-person dining is not Chipotle's only strategy. It also now has a robust, digital business, which increases the value of each Chipotle restaurant. Folks who may have been hesitant to visit a Chipotle in person are now ordering for delivery. Meanwhile, existing customers enjoy the conveniences added by digital ordering and frequent Chipotle more often.
Overall, Chipotle's sales increased by 26% in 2021 to $7.5 billion. That's a welcome sign for a business that had not grown revenue by over 20% since 2014.
What this could mean for Chipotle shareholders
In the quarter ended Dec. 31, Chipotle's average restaurant sales were $2.64 million. That's up by 20% from $2.2 million in the year-ago period. Management's estimate that, at maturity, it could operate 1,000 more locations could mean an incremental $2.64 billion in revenue per quarter. And that assumption ignores the likelihood of increasing average restaurant sales.
To add to the excellent news, Chipotle's acceleration of unit development means that it will reach this level much faster than previously estimated. It's no surprise then that Chipotle's stock was up by 10.4% on the day following the announcement. Shareholders are clearly pleased, and the latest results make the stock worth a closer look.
