Dive Brief:
- Chipotle’s digital sales grew 81% to $372 million during Q1 2020, making it the highest quarterly level for digital sales, CEO Brian Niccol said during a call with investors on Tuesday. Digital sales represented 26.3% of sales during the quarter.
- The company drove further investments toward digital and delivery as people started social distancing, he said. Those efforts included adding a national delivery partnership with Uber Eats, offering free delivery from March 15 into early May and switching from live sports to online and streaming platforms. These efforts helped increase engagement and March digital sales grew 103% year-over-year, representing 37.6% of sales during the month.
- Chipotle’s loyalty program grew to 11.5 million enrolled members, with signups spiking nearly fourfold in March, he said. Sixty-five percent of enrolled members are new to Chipotle, compared to 51% prior to the pandemic. The company is also starting to leverage this growth with personalized promotions.
Dive Insight:
Before COVID-19 hit the U.S., Chipotle had a strong start to the year, growing comp sales 14.4% and transaction volume by 11% through the end of February. Even with a 16% decline in comp sales in March, the company’s Q1 comp sales grew 3.3%. Comparatively, many other restaurant chains have already estimated high single-digit and double-digit declines or meager comp sales growth. McDonald's U.S. comp sales were up 0.1%, for example, for the quarter.
That isn’t to say that Chipotle’s sales have yet to be impacted. During the week ending March 22 and March 29, comp sales were down 34% to 35%, CFO John Hartung said during the call. So far in April, in-store ordering was down 75%, but delivery increased 150% and order-ahead grew nearly 120%. Digital currently accounts for roughly 70% of sales, he said.
The quick turnaround from March shows how much better equipped Chipotle has been to adjust operations in response to the dine-in and stay-at-home orders across the country. Over the last two years, Chipotle has significantly grown its digital presence, adopting order-ahead, delivery, a loyalty program, a second make line and Chipotlanes. It also began testing pickup windows in December. This increased focus on digital, especially making operations more streamlined for employees and customers, led the company to grow digital sales to over $1 billion last year.
“While delivery continues to be the fastest growing part of our digital platform, we are also pleased with our order-ahead business where average daily sales have doubled from the levels seen prior to COVID,” Niccol said. “This is part of the reason that we continue to shift our development pipeline more aggressively toward Chipotlanes as it helps drive our high margin digital order-ahead transaction.”
With other company’s scaling back development during this time, Chipotle is taking the opportunity to push forward with additional Chipotles and Chipotlanes. That means less competition for sites that can accommodate these drive-thru style windows, which will only help grow digital sales. Existing Chipotlanes had a higher digital mix in recent weeks, approaching 80% sales, Hartung said.
During Q1, the chain opened 19 stores, 11 of which featured Chipotlanes, Hartung said. Year-to-date the company opened 28 restaurants with 49 under construction. Groundbreakings have been hit with construction delays for a majority of its projects in April, however, but the company remains positive.
“Our optimism for Chipotlanes is further enhanced by our most recent opening a few weeks ago in Eureka, California,” Hartung said. “Day one sales of nearly $15,000 was one of the highest opening days of all time.”
Given Chipotle continues to push forward with its digital strategies, it is well positioned to make it out of the other side of the coronavirus pandemic.
