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Chipotle beats COVID-19 odds as Q1 digital sales soar

Chipotle Mexican Grill Inc. beat the odds during the first quarter, as the burrito chain withstood the COVID-19 outbreak by closing dining areas and surging its takeout and delivery business by almost doubling digital sales. 

The Newport Beach, California-based chain reported adjusted earnings of $3.08 per share, a decrease from year-ago earnings of $3.40 per share in the year-ago period. But earnings beat Wall Street consensus estimates of $2.90 per share. 

Chairman and CEO Brian Niccol told analysts on a conference call late Tuesday that the company was able to successfully leverage two years of building its online platform to drive record digital sales, which grew 81% to $372 million, its highest ever quarterly figure.

He also cited the company’s implementation of free delivery and national delivery partnership with Uber Eats as important factors. 

"Collectively these decisions translated into strong engagement with our guests as evidenced as evidenced by our March digital sales growing 103% year over year, representing 37.6% of sales," he told analysts. 

He cited a survey showing 15% of Chipotle customers had their food delivered for the first time during the last two weeks of March. He noted that the digital mix for the month of April is so far running in the high 60% range. 

He said average daily sales through its order-ahead business have doubled in comparison to the pre-COVID period and daily sign ups for its rewards program have spiked nearly four-fold, with 11.5 million current members.

Comparable restaurant sales rose more than 14% and transactions grew almost 11% through the end of February when the pandemic forced New York and other major markets to begin social distancing. 

However, the nationwide spread of the virus and subsequent shut down of dining service in March led comparable-store sales to slump 16% during the month of March.

Niccol said only about 100 Chipotle restaurants were fully closed, with most of them located inside shopping malls as well as 17 locations in Europe. The chain has a total of 2,638 stores companywide. 

He also said that hourly workers who remained on the job between March 16 and May 10 are being paid an additional 10%, while the company paid discretionary $7 million in bonuses to field leaders, general managers, apprentices and eligible hourly employees. 

CFO Jack Hartung said although in-store ordering was down 75% in April, delivery was up 150% and order-ahead has increased by 120%. 

Revenue increased 7.8% in the quarter to $1.4 billion. 

Hartung said the company was withdrawing its 2020 earnings guidance due to the uncertainty to get a clear picture of the overall economic situation. 

Niccol said the company remained highly liquid with $909.2 million in cash, restricted cash and short-term investments and no debt as of March 31. The company also said it would have another $100 million from deferred social security tax payments and accelerating tax depreciation as allowed by the CARES Act. 

He noted that the company agreed to pay $25 million for a deferred prosecution agreement related to the 2015 food safety incident, with $10 million to be paid on June 1.