Chipotle (CMG) on Tuesday posted a second-quarter earnings report that smashed Wall Street expectations, thanks to the mass return of customers after COVID-19 restrictions, and ongoing strength in digital sales.
Here’s what the California-based company reported, compared to Wall Street’s expectations, according to a Bloomberg consensus estimate:
Revenue: $1.9B vs. $1.88 billion expected
Adj. earnings per share (EPS): $7.46 vs. $6.54 per share expected
Same-store sales: 31.2% vs. 29.8% expected
The restaurant chain outperformed on all measures, even as it faces some scrutiny for raising prices to offset the impact of the labor shortage. Shares of Chipotle rose 1.5% in after-hours trading following the report, and up 14 percent year to date.
“We remain confident in our key growth strategies and believe they will help us achieve our next goal of $3 million average unit volumes with industry leading returns on invested capital that improve as we continue to add ‘Chipotlanes’,” Brian Niccol, Chipotle Chairman and CEO said in the release.
“Strong restaurant level economics combined with significant restaurant growth should allow us to optimize earnings power for many years to come,” Niccol added.
Dine-in customers returned strong, reflected in comparable restaurant sales that skyrocketed by 31.2%; however, digital sales did not take a hit from that rebound. The increasingly important segment accounted for 48.5% of sales, growing 10.5% from a year ago.
This year, the company plans to open approximately 200 restaurants, making significant progress this quarter with 56 new restaurants including one relocation; 45 of those locations included a drive-thru “Chipotlane.”
This comes as Wall Street is keeping a close eye on pent-up demand among Chipotle eaters this quarter, and the company’s efforts to innovate digitally.
Nicole Miller Regan of Piper Sandler & Co. reiterated shares of Chipotle as “overweight” with a price target of $2,100 in a note last month, amid optimism about Chipotle’s development pipeline with 200 new locations planned for fiscal year 2021.
“Although not specifically modeled, we are very encouraged by the ongoing supplementation of core new unit development with the build-out of next generation store/sales channels,” Regan said in a note last month.
Financial impact of $15 hourly wage
Labor availability and steeper menu prices are ongoing concerns for both Main Street and Wall Street alike. At the end of June, the company raised wages to $15 per an hour, which then was quickly followed by a 4 percent hike in menu prices. The move comes amid a broad labor crunch that’s driving up costs nationwide.
In the company’s forward-looking statements, Chipotle says it plans to keep an eye on “the impact of competition, including from sources outside the restaurant industry” — including “the increasingly competitive labor market and our ability to attract and retain qualified employees,” and the impact of its recent increase…
Go to the news source: Chipotle seen riding demand boom in Q2, with eyes on price hikes, innovation