Digital Orders Drive Major Growth for Chipotle in Q4

Chipotle (NYSE: CMG) reported fourth-quarter and full-year 2021 results after the market closed on Feb. 8. The restaurant chain delighted shareholders by revealing robust sales growth.

It quickly adapted to emphasize digital orders at the pandemic's onset when restaurants were forced to restrict in-person dining. And despite restaurants resuming normal operations, many customers are still choosing the digital option.

A burrito and chips on a plate.

Image source: Getty Images.

Digital sales stay high despite reopening

Comparable-restaurant sales, which exclude the impact of new-store openings and closings, increased 15.2% in the fourth quarter. Fueling that growth was new menu items, price increases, and digital options.

Digital sales accounted for 41.6% of overall sales during the quarter. Surprisingly, digital sales grew 3.8% from the same quarter last year when dining restrictions were still common in many regions.

In the fourth-quarterearnings call CEO Brian Niccol talked about how customers are benefiting from the digital channel:

As a result of this pandemic, many new consumers were introduced to Chipotle via our digital channels and are now using us for alternative and, at times, incremental occasions. Having two large and growing businesses that are supported by separate make-lines makes it easy for guests to access Chipotle through different channels and is a key point of differentiation. Currently, about two-thirds of our guests use in-restaurant as their exclusive channel with the remainder using Chipotle's digital ecosystem to conveniently access our real food.

Note that digital sales include orders placed for pick up and orders from third-party providers like Uber Eats and DoorDash. Digital orders from customers who order ahead and pick up are among the most profitable type for Chipotle. These transactions don't need a cashier to take payment, freeing up employees for other tasks. Fortunately for shareholders, about half of Chipotle's digital orders were of the most profitable type in the fourth quarter.

Looking at the annual figures, Chipotle's digital sales increased 24.7% and made up 45.6% of the total. The $3.4 billion in annual digital sales more than tripled from levels reported before the pandemic.

Interestingly, Chipotle established a presence in the metaverse, partnering with Roblox for a Halloween promotion. The result was that Halloween 2021 set a company record for digital transactions.

Building customer loyalty

A significant benefit of a digital business is that it's easier to connect with customers. An individual who walks into your restaurant, eats, and never returns is a lost opportunity. Unfortunately, there's little Chipotle can do about that.

Compare that to a customer who orders digitally. Chipotle has the customer's information and the ability to connect through the app, for example. If the company notices a customer has not reordered in three months, it can offer a free item or other promotion to reengage them. Chipotle has already attracted 26.5 million rewards members, which management expects will fuel its digital flywheel.

Overall, the emergence of Chipotle's digital business means the restaurant chain came out of the pandemic an even stronger company, which is great news for shareholders.

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Parkev Tatevosian owns Chipotle Mexican Grill and Uber Technologies. The Motley Fool owns and recommends Chipotle Mexican Grill, DoorDash, Inc., and Roblox Corporation. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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