Chipotle (CMG) Benefits From Comps Growth & Expansion Efforts
Chipotle Mexican Grill, Inc. CMG is benefiting from strength in digital sales, comps growth, rise in menu prices and new restaurant openings. Consequently, the company’s shares have gained 16% in the past six months compared with the industry’s growth of 17.3%.
This Zacks Rank #2 (Buy) company has an impressive long-term earnings growth rate of 23.4%. Let’s delve deeper and find out the factors driving the company’s performance.
Growth Drivers
Chipotle is focusing on expanding its digital program to drive growth. Moreover, partnerships with Uber Eats and Grubhub are attracting new customers. The company has also expanded its digital capabilities into Canada.
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Collaboration with all the major third-party delivery aggregators has increased orders. To boost convenience in the digital ordering platform, the company has also initiated features such as unlimited customization, contactless delivery and group orders. The company is also focused on robotics-based autonomous vehicles for delivery, which is likely to enhance the customer experience in the upcoming periods.
Digital sales contributed 37% to sales during the third quarter of 2022. The company witnessed a rise in order-ahead transactions courtesy of enhanced guest access and convenience.
Impressive comps performance continues to drive growth. Despite the pandemic, the company reported comps growth for the ninth straight quarter. During the third quarter, comparable restaurant sales increased 7.6% year over year, following growth of 10.1% (in second-quarter 2022), 9% (first-quarter 2022), 15.2% (fourth-quarter 2021), 15.1% (third-quarter 2021), 31.2% (second-quarter 2021), 17.2% (first-quarter 2021) and 5.7% (fourth-quarter 2020).
Consistent strength in digital sales, solid recovery of in-restaurant sales and positive customer reception to new menu items also contributed to the company’s results. For the fourth quarter, the company expects comps growth in the mid-single digit range.
New restaurant openings are also driving the company’s performance. During the first, second and third quarters of 2022, Chipotle opened 51, 42 and 43 new restaurants, including 42, 32 and 38 Chipotlanes, respectively. The addition of Chipotlane enhanced customer access and convenience and bolstered new store restaurant sales, margins and returns.
The company continues to expand its digital drive with Chipotlane. It has opened a digital-only kitchen as well. The company expects to open 235-250 restaurants (in 2022) and 255-285 restaurants (in 2023), with at least 80% of them including a Chipotlane.
Other Key Picks
Some other top-ranked stocks in the Zacks Retail – Restaurants industry are Wingstop Inc. WING, Dine Brands Global, Inc. DIN and Cracker Barrel Old Country Store, Inc. CBRL.
Wingstop sports a Zacks Rank #1 (Strong Buy). WING has a long-term earnings growth rate of 11%. Shares of WING have declined 0.2% in the past year. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Wingstop’s 2023 sales and EPS suggests growth of 18.1% and 16.4%, respectively, from the comparable year-ago period’s levels.
Dine Brands currently carries a Zacks Rank #2. DIN has a trailing four-quarter earnings surprise of 10.6% on average. The stock has declined 11.7% in the past year.
The Zacks Consensus Estimate for Dine Brands’ 2022 sales suggests growth of 2.1% from the corresponding year-ago period’s levels.
Cracker Barrel currently carries a Zacks Rank #2. CBRL has a trailing four-quarter earnings surprise of 4.8% on average. Shares of CBRL have decreased 18.4% in the past year.
The Zacks Consensus Estimate for Cracker Barrel’s 2023 sales and EPS suggests growth of 6.4% and 7.1%, respectively, from the comparable year-ago period’s levels.
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