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Chipotle sees Q2 digital surge to beat estimates amid COVID impact

Chipotle Mexican Grill Inc. said digital sales more than doubled during the second quarter, beating estimates despite taking an overall profit decline due to the impact of COVID-19.

Chipotle said digital sales rose 216% to $829.3 million during the quarter compared with year-ago figures, accounting for more than 60% of the restaurant company's overall sales. The digital surge was aided by increased advertising towards that segment, plus new partnerships with Uber Eats and Grubhub.

"Our investment in digital over the past few years has provided our customers with convenient access to Chipotle how and where they want it," Brian Niccol, chairman and chief executive at Chipotle, said in the earnings announcement. "

The company expanded its digital presence during the quarter with new partnerships on the third party platform and expanding digital ordering to Canada. Company executives noted during the conference call that the company attracted a large number of brand new customers through digital ordering.

Same-store sales fell 9.8% in the quarter from the year-ago period. However same-store sales showed improvement overall during the quarter, rebounding from a low of 24% below year-ago levels in April to 7% down in May and 2% ahead of year-ago levels in June. Early data from July show same-store sales are up 6.4% to date.

Restaurant level operating margins fell to 12.2% from 20.9 in the year-ago quarter, mainly due to higher delivery expenses driven by increased delivery sales, sales deleverage and temporary investments in higher wages due to COVID-19, partially offset by lower avocado expenses and benefits from price increases in menu items during late 2019.

The company reported adjusted earnings of 40 cents a share, which beat consensus estimates. This was 90% below year-ago earnings of $3.99 a share.

Net income fell to $8.2 million, or 29 cents per share, compared with $91 million, or $3.22 per share, in the year-ago quarter.

The company declined to provide guidance for fiscal 2020 due to uncertainty related to COVID-19 and the overall economic outlook.

Image courtesy of Chipotle.