In this file:
· Chipotle says inflation is convincing its high-income customers to trade down for a burrito more often
· Chipotle investing in ‘fundamentals’
Chipotle says inflation is convincing its high-income customers to trade down for a burrito more often
CEO Brian Niccol says high-income customers are increasing Chipotle trips in place of more expensive dining.
Chipotle says it relies on high-income customers for the bulk of sales.
Mary Meisenzahl, Business Insider
Jul 30, 2022
Inflation is changing how Chipotle customers behave, and it might actually be a good thing for the fast-casual chain.
CEO Brian Niccol said that the majority of Chipotle customers have relatively high household incomes and they have increased the frequency of orders in a July earnings call. He attributed the phenomenon to those customers trading in meals at higher-priced restaurants for Chipotle orders instead.
This subset of Chipotle customers is ordering burritos and bowls more frequently despite regular price increases, with another planned for August that could bump the price of entrees in some markets by as much as a dollar. In the first quarter of 2022, Chipotle raised menu prices by 4%, CFO Jack Hartung told investors on an earlier call. Those were on top of earlier price hikes in part due to raising wages for employees in June 2021 when the fast-casual chain said that it raised prices by about 4%.
These purchasing trends are consistent with available information about Chipotle's customer base. The typical Chipotle customer is a white, married millennial between 25 and 34 years old, according to data provided by analytics firm Numerator. They're likely to have a college degree and make more than $80,000 a year.
Inflation, which is at a 40-year-high, isn't necessarily driving all customers to increase their Chipotle trips. The typical low-income consumer "definitely has pulled back their purchase frequency," Niccol said in the same call, though "fortunately," they don't make up the majority of its customers. Lower-income consumers are cutting back across the board, as McDonald's noted in its recent earnings call, leading to some customers downgrading to cheaper items and cutting back on combo meals...
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Chipotle investing in ‘fundamentals’
By Monica Watrous, Food Business News
NEWPORT BEACH, CALIF. — Chipotle Mexican Grill, Inc. is investing in “being brilliant at the basics” after the fast-casual chain experienced a slowdown in sales during the latter half of the recent quarter, said Brian R. Niccol, chairman and chief executive officer. A newly launched operations initiative focuses on retraining employees on the fundamentals of the business.
“These fundamentals include having great culinary prepared and ready to serve, open to close in a food-safe environment, ensuring that restaurants are staffed and appropriately deployed across both the digital make-line and front make-line; improving order accuracy and timing for the digital business; and increasing throughput in hospitality for the in-store business,” Mr. Niccol outlined during a July 26 earnings call.
Net income for the second quarter ended June 30 was $259.9 million, equal to $9.32 per share on the common stock and up 12% from net income of $188 million, or $6.68 per share, in the prior-year period. Excluding unusual expenses related to certain legal proceedings, performance share modification, corporate restructuring, restaurant asset impairment and closure costs, offset by an unrealized gain on investments, adjusted net income was $261.2 million, which compared with $212.8 million in the year-ago quarter.
Quarterly revenues totaled $2.2 billion, up 17% from $1.9 billion the year before.
Comparable restaurant sales ticked up 10%, and in-restaurant sales grew 36%. Digital sales represented 39% of food and beverage revenue.
“We were on track for comparable sales to reach the upper end of our guidance range for the first half of the quarter,” said John R. Hartung, chief financial officer...