- Oops!Something went wrong.Please try again later.
Chipotle Mexican Grill, Inc. CMG is likely to benefit from digital initiatives, collaboration with third-party delivery providers and menu innovation. However, dismal traffic due to the coronavirus pandemic, and rise in expenses related to delivery sales and elevated beef prices is concerning.
Let’s delve deeper.
In order to drive digital sales and retain customers amid the coronavirus crisis, Chipotle is leaving no stone unturned to make digital ordering more appealing to customers and increasingly efficient for restaurants.
The company has redesigned and simplified the online ordering site, enabled online payment for catering and online meal customizations, as well as collaborated with several well-known third-party providers for delivery. Also, there has been a significant increase in digital orders and guest satisfaction since the rollout of its “Smarter Pickup Times” technology. Another initiative that has been benefiting the company is the rewards program. Moreover, collaboration with major third-party delivery aggregators has increased orders.
During the third quarter, it initiated the launch of the group ordering feature on the Chipotle app, thereby boosting easy and frictionless user experience. In third-quarter 2020, digital sales soared 202% year over year to $776 million. Notably, digital sales represented 49% of the quarterly sales. Nonetheless, the company expects the momentum to continue in fourth-quarter 2020 and digital sales to cross $2.5 billion in 2020.
It is working on strengthening its brand and recovering sales by shifting its strategy from giveaways, discounts and rewards to new menu items, operational excellence, and enhancement of guest experience by retraining workers, technology-driven convenience, along with more aggressive brand marketing. Additionally, Chipotle has been working on a new pipeline for its menu offerings.
So far this year, shares of the company have rallied 69.5% compared with the industry’s 16.1% growth.
Chipotle’s results in the coming quarters are likely to be impacted by the pandemic. Although the company’s 85% of dining services are open, traffic is still very low. We believe the pandemic mess will further dent traffic and sales in the coming quarters.
Moreover, Chipotle has been continuously shouldering increased expenses, which have been detrimental to margins. During the third quarter, the company witnessed a rise in expenses related to delivery sales and elevated beef prices. Also, implementation of food safety practices increased the quantity of labor required to prepare and serve food, thereby resulting in higher labor costs that might dent profit margin.
Zacks Rank & Key Picks
Chipotle currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the same space include Jack in the Box Inc. JACK, Ruth's Hospitality Group, Inc. RUTH and FAT Brands Inc. FAT, each carrying a Zacks Rank #2 (Buy).
Jack in the Box has a three-five year earnings per share growth rate of 10.6%.
Ruth's Hospitality and FAT Brands’ earnings for 2021 are expected to surge 264.6% and 127%, respectively.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
See these 7 breakthrough stocks now>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Jack In The Box Inc. (JACK) : Free Stock Analysis Report
Ruths Hospitality Group, Inc. (RUTH) : Free Stock Analysis Report
Chipotle Mexican Grill, Inc. (CMG) : Free Stock Analysis Report
FAT Brands Inc. (FAT) : Free Stock Analysis Report
To read this article on Zacks.com click here.