Please ensure Javascript is enabled for purposes of website accessibility

Oh, So This Is Where Chipotle Customers Are Eating

By Rick Munarriz - May 12, 2016 at 11:23AM

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 troubled burrito roller is struggling, but Qdoba, Taco Bell, and Chuy's have comps pointing in the right direction.

The first three months of 2016 were terrible for Chiptotle Mexican Grill (CMG -0.04%). The former market darling in fast casual put out its first quarterly loss as a public company. It also clocked in with a brutal 29.7% decline in comps, as a 21% drop in transactions and coupon-flashing patrons spending less combined to create one of the biggest falls in comparable-restaurant sales in eatery history. In other words, existing locations rang up 29.7% fewer sales than they did during the first three months of last year.

That's horrendous, of course, but where did those customers go? They didn't stay home or stop eating. If they had a burrito, taco, bowl, or salad craving they probably went somewhere else. Now that we're wrapping up this lamentable earnings seasons for Chipotle, let's take a look at where some of those hungry guests may have gone. 

Qdoba

Chipotle made fast casual and "better burritos" cool on the way up, and one of the best coattail riders has been Jack in the Box's (JACK 3.16%) Qdoba. Its comps rose 2.1% in the 12 weeks ending April 10. This is stacked on top of an 8.3% increase a year earlier, so we're looking at an impressive 10.6% average increase over two years.

The strength at Qdoba helped offset negative comps at Jack in the Box's namesake burger chain. There are now more than 600 Qdoba locations, but that's fewer than a third of Chipotle's 2,066 outlets. Jack in the Box has plenty of expansion room left for Qdoba.

Taco Bell

Burrito buffs will argue that the chasm is wide when it comes to pitting the food quality at Chipotle to Yum! Brands' (YUM 2.82%) Taco Bell, but it's hard to deny the deals that bargain seekers can find at Yum! Brands' quick-service Mexican food chain. You're not walking out of Chipotle with a burrito for a buck anytime soon (outside of recent freebie promotions). One can argue that Yum! Brands is narrowing the gap. Chipotle's quality has been consistent over the years, but Taco Bell has been adding more items with broader appeal. It's still not there. It will never be there. However, head-turning additions including Doritos Locos Tacos, a creative breakfast rollout, and more recently the Quesalupa keep guests coming for more. 

Taco Bell's comps rose a mere 1% in its latest quarter, but it's up 7% over the past two years. That's a big win when compared to Chipotle's 22.4% slide in comps over the past two years.

Chuy's

It may not be fair to compare Chipotle to table-service restaurants, but Chuy's (CHUY 3.97%) is not a sleepy, old-school operator. Chuy's is expanding quickly, and with most of its menu priced below $10 and a penchant for speedy service, it's a reasonable alternative for a lunchtime or festive dinnertime fix. 

Comparable-restaurant sales climbed 3.2% in its latest quarter. Chuy's has now come through with 23 consecutive quarters of favorable comps.

There was a time when Chipotle was the champ of stringing together long streaks of year-over-year sales growth. However, after back-to-back quarters of double-digit percentage declines, some new leaders appear to be rising -- at least until Chipotle gets its act together again.

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, Inc. Stock Quote
Chipotle Mexican Grill, Inc.
CMG
$1,306.80 (-0.04%) $0.46
Yum! Brands, Inc. Stock Quote
Yum! Brands, Inc.
YUM
$116.71 (2.82%) $3.20
Jack in the Box Inc. Stock Quote
Jack in the Box Inc.
JACK
$57.83 (3.16%) $1.77
Chuy's Holdings, Inc. Stock Quote
Chuy's Holdings, Inc.
CHUY
$20.71 (3.97%) $0.79

*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
311%
 
S&P 500 Returns
110%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/01/2022.

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.