Chipotle: Will Rebuilding Efforts Help Same-Store Sales in Q2?

Same-store sales growth (or SSSG) is expressed as a percentage, and it measures the increase in revenue from existing restaurants over a certain period. SSSG is driven by ticket size and traffic.

To counter falling SSSG in 1Q16, Chipotle Mexican Grill (CMG) undertook many marketing and promotional campaigns along with its enhanced food safety measures. However, analysts are expecting the revival to take more time than earlier expected, as customers will still be skeptical about the food quality at Chipotle’s restaurants. Analysts are expecting Chipotle to post SSSG of -20.1%, which is a slight improvement from -29.7% in 1Q16.

Some of the enhanced food safety measures:

• high-resolution DNA-based testing of certain food products
• new food handling and preparation processes, including the blanching of certain ingredients, preparation of tomatoes, lettuce, and bell peppers in central kitchens, and marination of chicken, steak, and other ingredients to enhance food safety
• enhanced food safety training program for the crew
• a third-party audit of food safety procedures

In 2Q16, analysts are expecting Panera Bread (PNRA), Shake Shack (SHAK), and Brinker International (EAT) to post SSSG of 3.4%, 5.4%, and -1.9%, respectively.

To improve traffic at its restaurants, Chipotle has added Chorizo—a spicy chicken and pork sausage—to its menu in some US cities in July. Also, it introduced new Chiptopia Summer Rewards, which offer customers free food and bonus rewards. Looking at these measures, analysts expect Chipotle to post SSSG of -12.5%, 4.8%, and 14.1% in 3Q16, 4Q16, and 1Q17, respectively.

In the next part of this series, we’ll look at Chipotle’s EBIT margins.