What Drove Chipotle’s Same-Store Sales Growth in 2Q17?

2Q17 performance

In 2Q17, Chipotle Mexican Grill (CMG) posted SSSG (same-store sales growth) of 8.1%—compared to analysts’ estimate of 9.7%. In 2Q16, the company’s SSSG fell 23.6%.

What Drove Chipotle’s Same-Store Sales Growth in 2Q17?

The rise in traffic contributed 5.3%, while growth in the average check size contributed 2.8%. The increase in the check size was due to fewer promotions compared to BOGOs (buy one, get one) in 2Q16. Chipotle’s management claimed that news surrounding cyber security issues negatively impacted the company’s SSSG by 0.3%–0.5%.

Chipotle’s SSSG was driven by the implementation of technological advancements, aggressive marketing and promotional offers, and improved menu items. To enhance customers’ experience, Chipotle implemented a new ordering website, Smarter Pickup Times technology, and meal customizations. During the quarter, the company launched “As Real As It Gets,” which focused on Chipotle’s use of real whole ingredients. All of these imitative drove Chipotle’s SSSG in 2Q17.

Peer comparisons

During the quarter, McDonald’s (MCD) posted a systemwide SSSG of 6.6%, while Domino’s Pizza (DPZ) posted SSSG of 9.5% in the US and 2.6% in the international market.

Outlook

Chipotle’s management reiterated its 2017 SSSG guidance to be in the high-single digits. Introducing queso, implementing technological advancements, and advertising and promotional initiatives are expected to drive Chipotle’s SSSG in the next four quarters. Earlier this month, the company opened the Chipotle NEXT Kitchen in New York City. It will test the operational impact of new menu items. The company also stated that it’s on track to launch its mobile app later this year.

Next, we’ll look at Chipotle’s EBIT margins.