Analysts expect Chipotle Mexican Grill (CMG) to post revenues of $1.24 billion in the third quarter, which is a 9.5% growth from $1.13 billion in Q3 2017.
Chipotle’s revenue growth is expected to be driven by the addition of new restaurants and positive SSSG (same-store sales growth). By the end of the second quarter, Chipotle operated 2,427 restaurants, which is 97 more than 2,330 at the end of the third quarter of 2017.
To drive its SSSG, Chipotle is focusing on the implementation of technological advancements, delivery service expansion, menu innovations, and new marketing campaigns to regain customer loyalty and drive sales.
The second make lines, which fulfill online and take-out orders, have lowered customer wait times and improved the customer experience. Management plans to expand the service from 500 restaurants at the end of the second quarter to 1,000 restaurants by the end of the year. It expects to have the service at all restaurants by the end of 2019.
Last quarter, the company successfully introduced digital pickup shelves to handle digital orders at various restaurants in New York and reduce wait times. Chipotle management plans to expand the service to other restaurants.
On August 28, Chipotle launched direct delivery service by partnering with DoorDash, which lets customers request delivery without leaving the company’s website or app. The service is available in 70 markets, covering ~1,800 Chipotle restaurants.
To improve its food safety protocol, Chipotle has deployed Zenput, a software that audits restaurant operations remotely, thus increasing field leaders’ visibility of restaurant operations. Redesigning its restaurants, training employees, and improving marketing and promotional programs could boost its SSSG.
However, the outbreak of food safety issues on July 26 at a Chipotle restaurant in Powell, Ohio, made ~650 people ill, which could negatively impact sales during the quarter.
Peer comparisons and outlook
For 2018, Chipotle set its SSSG guidance at mid-to-high-single-digit growth. It also expects to open new restaurants at the lower end of its earlier guidance of 130–150 restaurants. During the same period, analysts expect Chipotle to post revenue of $4.85 billion, which would be an 8.3% growth from $4.48 billion in 2017.
Next, we’ll look at analysts’ EPS expectations for the third quarter.