In order to counter sluggish same-store sales performance in a
Chipotle Mexican Grill Inc.
) is banking on a new sales generating initiative. This
Denver-based company will start its catering service in its home
court Colorado beginning Jan 21 and expand it across the nation
in due course.
Basically, management intends to capitalize on the reputation of
Chipotle's products by offering an off-premise service. The
service will allow groups of 20 to 200 guests to select meals as
per their own preference as they do at Chipotle restaurants. This
initiative will make Chipotle go beyond its outlets and cater to
its customers in their homes, schools and offices, which will
further enhance the company's presence.
Although Chipotle's fourth quarter 2012 revenue is expected to
increase 17.2% year over year, of late, the company has been
reeling under comps pressure. Its same-store sales gain of 4.8%
during the third quarter marked a 650 basis points (bps) downfall
year over year and 320 bps sequentially. For the fourth quarter,
Chipotle is likely to post 3.8% comps growth, which will again be
a sequential decline of 100 bps.
Apart from launching a catering service, Chipotle will also test
a new vegetarian offering called Sofritas in San Francisco Bay
Area next month. If successful in its test run, the product will
be rolled out in additional markets.
Chipotle's innovative offerings always distinguish it from its
peers. It already has its 'Food With Integrity Program' in store
that focuses on a higher mix of naturally raised pork, chicken
and beef, and organic produce. It is the only national restaurant
company to use fresh produce since 2008.
However, as far as catering is concerned, Chipotle is not the
only company to use this as an incremental sales driver. One of
its close peers
Panera Bread Co.
) is benefiting largely from this initiative. Panera's catering
business has expanded about 20% over the past 10 years, which is
anticipated to witness a further boost from the convenient online
There is also
Jack in the Box Inc.
) Qdoba Mexican Grill chain that offers catering services. We
believe, like some of its industry equivalents, catering will
prove to be a strong growth driver for Chipotle in the years to
come. Chipotle currently retains a Zacks Rank #3 (Hold).
CHIPOTLE MEXICN (CMG): Free Stock Analysis
JACK IN THE BOX (JACK): Free Stock Analysis
PANERA BREAD CO (PNRA): Free Stock Analysis
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