Chipotle has benefited from a surge in to-go sales during the pandemic as consumers look for convenient food. The Newport Beach, Calif.-based burrito chain said Wednesday that same-store sales grew 8.3% in its third quarter over last year, exceeding the 7.3% increase analysts expected. Digital transactions, which tripled, accounted for nearly half the company's revenue.
"That was a major shift," Chief Financial Officer Jack Hartung said in an interview.
|CMG||CHIPOTLE MEXICAN GRILL, INC.||1,835.12||+28.25||+1.56%|
Still, costs including restructuring and legal expenses weighed on profits. Chipotle's earnings, on net income of $80 million, were $2.82 a share, down from $3.47 during last year's period. Revenue in the quarter was $1.6 billion.
Chipotle's shares fell 4% to $1,307 in aftermarket trading. The stock was up 63% year-to-date as of Wednesday's close. Chipotle declined to give guidance for same-store sales and new openings for its fiscal year, citing ongoing uncertainty surrounding the pandemic.
Delivery expenses are weighing on Chipotle and other restaurants during the pandemic as more sales happen outside of dining rooms. Delivery companies often charge double-digit commissions on food sales to handle those orders, prompting many restaurants to encourage customers to pick up their meals.
Chipotle tested higher prices for delivered items during the quarter, with premiums of 13% to 17% in some market trials. The chain lowered its delivery surcharge during the pandemic, but said it wanted to follow rivals in increasing to-go prices to offset costs. Customers ended up paying a two- to three- percent premium on delivery on average through the new menu prices, the company said.
"A lot of people are pricing a lot higher than we are in the delivery channel," CEO Brian Niccol told investors.
The chain is also building new locations even as tens of thousands of independent restaurants are closing their doors as the pandemic has wiped out their dine-in business. Chipotle added 44 restaurants during the quarter, 26 of them including drive-throughs. Drive-throughs oriented toward online orders, known as Chipotlanes, average higher sales than the chain's traditional locations, Chipotle said.
Chipotle's margins improved from the second quarter, but still fell below last year's period as it paid for coronavirus-related expenses and incurred increased costs related to delivery sales and elevated beef prices. Chipotle also said it sold fewer high-margin beverages, a trend among many restaurants primarily operating to-go during the pandemic.
Earnings adjusted for one-time expenses of $3.76 exceeded analyst expectations of $3.47 a share.