"You have to take it at a measured pace," Niccol said. "Because the last thing you want to be doing is opening restaurants ahead of your capability to run them."
Pricier burrito bowls and more mobile orders helped Chipotle Mexican Grill beat earnings expectations Thursday, despite fewer customers walking through the door during the third quarter.
In an upbeat earnings call, CEO Brian Niccol said the company was declining to provide a specific fourth-quarter earnings forecast, but it was already seeing a lift in sales from its new marketing campaign, which began in September.
In October, same-store sales have grown 4 percent, the company said, attributing a portion of the gain to the "For Real" campaign.
Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Adjusted earnings: $2.16 per share vs. $2.00 per share
- Revenue: $1.23 billion, in line with estimates
- Same-store sales: 4.4 percent growth overall vs. 5 percent growth
The advertisements highlight the company's 51 ingredients everyone can recognize and the tagline "the only ingredient that's hard to pronounce at Chipotle is 'Chipotle.'" The television ads will run through November, while the online and social media ads will run through the end of the year.
Chipotle shares were whipsawing in after-hours trading. Immediately after the report was released, the stock dropped more than 2 percent, only to spike as high as an 8 percent gain, as investors analyzed the report. More recently, the stock as up more than 1 percent. Shares have gained more than 46 percent since January.
Net income rose 3.1 percent to $38.2 million, or $1.36 per share, up from $19.6 million, or 69 cents per share a year ago. Excluding items, including the cost of the company moving its headquarters to California, Chipotle earned $2.16 per share, topping estimates of $2.00 per share, according to Refinitiv.
Revenue rose 8.6 percent to $1.23 billion, inline with what Wall Street had expected.
Same-store sales rose 4.4 percent, weaker than the 5 percent analysts has expected. A 3.8 percent menu price increase and new marketing helped boost sales in the quarter, the company said. However, traffic in the period fell 1.1 percent.
Notably, a food safety outbreak in Ohio that occurred early in the quarter had "no lasting impact" on the brand, John Hartung, chief financial officer at Chipotle said on an earnings call Thursday.
The company said it expects same-store sales for the full year to rise by a low to mid-single digit rate.
Digital sales, a major initiative for Niccol, grew 48.3 percent and now account for 11.2 of overall sales.
This uptick comes about five months after the company announced that it was investing $135 million to speed up its mobile and online orders, launch an ad campaign and close up to 65 underperforming locations.
Food, beverage and packaging costs were were about 1.6 percent lower than a year ago.
Chipotle saw its margins improve during the quarter, driven by gains in same-store sales and lower marketing and promotional costs, partially offset by an increase in repairs and maintenance during the quarter.
To increase productivity, Chipotle has been updating its kitchens with a second-make line. These are buffets similar to the one at the front of the store, but it's just for digital orders. Employees no longer use paper receipts to fill the orders, instead a flat screen TV shows what ingredients need to go into the order. So far, there are 750 restaurants outfitted with this new line, with the plan to have all locations remodeled by the end of 2019.
Additionally, digital order pick-up shelves, which are meant to prominently display online orders once they have been filled, are now in 350 Chipotle locations. The company expects these shelves will be in all restaurants by mid-2019.
The company, which has 2,450 restaurants nationwide, cut the number of new stores it expects to open this year. Previously, it said it would open 130 to 150 restaurants in 2018, but it now expects the actual number will be on the low end of that range. In 2019, it projects that it will open 140 to 155 new restaurants.
Niccol attributed the slower pace of growth to the need to find strong management.