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Chipotle's fresh food campaign drives profit beat, shares surge

Stock MarketsFeb 06, 2019 06:56PM ET
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© Reuters. FILE PHOTO: The logo of Chipotle Mexican Grill is seen at a restaurant in Paris

By Nivedita Balu

(Reuters) - Chipotle Mexican Grill Inc (NYSE:CMG) topped Wall Street forecasts for quarterly earnings as aggressive marketing helped lure more diners and boost online orders, sending its shares up 10 percent in after-hours trading on Wednesday.

More than three years after a series of food-borne illnesses at restaurants tarnished the burrito chain's reputation, the company has tried to win back customers through fresh menus and targeted marketing campaigns.

Its latest campaign, called "For Real," ran both on social media platforms and at restaurants, showcasing the freshness of ingredients used in its tacos and burritos.

"I believe their image rehabilitation is close to complete," said Doug Ciocca, the CEO of Kavar Capital Partners, which does not currently own shares in Chipotle but has positions in other restaurant companies.

Brian Niccol, who was installed as Chipotle's CEO a year ago after a successful stint at Taco Bell, has focused on improving the company's food delivery through promotions, while also transforming the restaurant experience with new technology.

For example, Chipotle offered free delivery during the College Bowl season in December, and gave away its much loved guacamole for free for those ordering through its app on "National Avocado Day" last year.

Such promotions, besides tie-ups with food-delivery services Doordash and Postmates, helped "digital sales" rise nearly 66 percent in the December quarter, compared with about 48 percent in the previous quarter.

"We're going all in on providing more convenient user access to our customers and the response so far has been great," Chief Financial Officer John Hartung said in an interview. "You'll see more of that during the year."

The company reported that sales at outlets open for at least 13 months jumped 6.1 percent in the three months ended December, much better than Wall Street analysts' average forecast of a 4.49 percent increase, according to IBES Refinitiv data.

For a graphic on Chipotle's same-restaurant sales, click: https://tmsnrt.rs/2t6PBaT

Sales at Chipotle restaurants open for an year - https://tmsnrt.rs/2UFjWci

The burrito chain projected that these sales would rise in the mid-single percentage digits through 2019, and that they were improving mainly due to stronger traffic at restaurants and a higher average check boosted by menu price increases.

Its newer menus have included salad bowls and other items to draw more health-minded customers, such as those on the popular Paleo diet. It is also working to add innovative options like bacon, quesadillas and a Mexican chocolate milkshake.

Excluding one-time charges, the company reported earnings of $1.72 per share, topping analysts' estimates of $1.37.

Revenue overall rose 10.4 percent to $1.23 billion.

Chipotle also announced that it would spend $100 million to buy back shares.

Chipotle's fresh food campaign drives profit beat, shares surge
 

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