Chipotle’s digital sales grew 10.5% in the second quarter

Dive brief:

  • Chipotle increased its revenue by 38.7% year-on-year, product sales by 31.2% and digital sales by 10.5% in the second quarter of 2021, according to the company’s earnings release on Tuesday. Digital sales generated $ 916.5 million for the channel in the quarter.
  • The company’s returns are expected to continue improving as it accelerates its Chipotlane model, CEO Brian Nicolas said in the press release. The company plans to open around 200 restaurants this year, and more than 70% of those units will understand the digital advance order pickup route, CFO Jack Hartung said on a call with investors on Tuesday. Chipotlanes opens with sales about 20% higher than traditional stores, Hartung said.
  • The growth in the channel’s digital sales comes despite sales making up less of its overall sales mix compared to the first quarter – 48.5% versus 50%, respectively – as restrictions ease and restaurants are starting to return to pre-pandemic levels. Dining room sales are around 70% of pre-pandemic levels, and Chipotle has continued to maintain around 80% of its digital sales, Niccol said.

Dive overview:

Chipotle’s digital presence is likely to remain strong as the chain experiments with digital-only product launches, like its quesadilla, and expands its already strong loyalty program, which now has more than 23 million members.

Notably, Chipotle’s profit margins are at their highest levels in years, in part due to increases in menu prices and declining promotional activity. The chain can be leveraged to take these steps as it has created more digital addiction of its consumers during the pandemic. In February, for example, Niccol touted the work Chipotle is doing in 2020 to make its digital channels more convenient, adding improvements like unlimited personalization, contactless delivery, and bulk orders.

“We believe our digital sales mix will moderate as capacity restrictions ease and customers feel more comfortable ordering and physically dining at our restaurants,” said Niccol. “However, we expect absolute digital sales dollars to find a new balance in 2021 and increase from there. We are encouraged to see that so far in July, we have continued to hold onto those same digital gains. if the in-store recovery has strengthened. “

Following a strong restaurant economy and significant unit growth – Chipotle has opened 96 new units so far this year – the company remains confident that its key growth strategies will allow it to reach 6,000 restaurants in North America with average unit volumes well over $ 3 million. , Niccol said. At the end of the second quarter of 2021, AUVs topped $ 2.5 million, Niccol said on the call.

With around 50% of its sales coming from digital channels, Chipotle is a rare company in the non-pizza industry. Wingstop makes around 60% of its sales through digital channels, for example, while Noodles & Company’s digital sales accounted for around 62% of sales in the first quarter of 2021.

Meanwhile, Chipotle’s quick-service peers are still in the high single-digit to low double-digit range on digital sales. Wendy’s expects to reach 10% this year, for example, while Burger King’s digital sales were around 8% at the end of the fourth quarter of 2020. McDonald’s expects its digital sales in its markets to US, UK, Canada, Australia, Germany and France reach about 20% of its system-wide sales this year as it rolls out its MyMcDonald’s loyalty program.

The disparity in the digital sales mix between Chipotle and its QSR peers illustrates the impact of drive-thru on QSR. While Chipotle is accelerating the rollout of its Chipotlane drive-thru model, these controls differ from a traditional QSR drive-thru in that they are facilitated by a mobile advance order functionality. This could help keep digital sales high for the channel. Over the past 12 months, Chipotlanes has generated about 15% higher digital sales than traditional stores, Hartung said.

“Not only are we happy with the level of digital sales and the overall mix, but we are also excited to see that our highest margin transaction, digital pickup orders is gaining ground and we expect this to continue to grow. as we add more Chipotlanes and customers experience the value of this opportunity, ”Niccol said.

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