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Chipotle Mexican Grill, Inc. CMG continues to undertake extensive sales-building efforts to enhance customer experience and strengthen top-line growth. It also increasingly focuses on offering good quality food to customers. With a decent share price appreciation and a Zacks Rank #2 (Buy), the company is currently a profitable investment choice.
Shares of Chipotle have gained 54.4% over the past year, outperforming the industry’s 20.2% rally.
Moreover, an upward revision in earnings estimates for 2019 reflects analysts’ confidence in the company’s earnings potential. Over the past 60 days, the Zacks Consensus Estimate for its earnings in 2019 has been revised upward by 6.1%. Further, the company delivered positive earnings surprise in each of the trailing four quarters, the average beat being 12%.
Sales-Building Initiatives Support Top-Line Growth
Chipotle's increased focus on food safety and enhancing customer experience along with various sales-building initiatives bode well. The company is working on strengthening sales growth by shifting its strategy from giveaways, discounts and rewards to new menu items, operational excellence, enhancement of guest experience by retraining workers, technology-driven convenience and more aggressive brand marketing.
For 2019, the company’s priorities will revolve around the five key initiatives namely, digital system investments such as pickup shelves, digitized make lines, loyalty and delivery; marketing programs focusing on cooking techniques; and menu innovation and operational excellence.
Driven by these major efforts, we expect Chipotle’s top line to grow in 2019. Consequently, the Zacks Consensus Estimate for its revenues in 2019 is pegged at $5.4 billion, suggesting 11.2% growth from the reported figure in 2018.
Increasing Focus on Digital Capability Enhancement
Chipotle is prioritizing its e-Commerce program to gain customer confidence as part of its digital innovation. In the regard, it redesigned and simplified its online ordering site, enabled online payment for catering, online meal customizations, and collaborated with several well-known third-party providers for delivery.
The first quarter of 2019 saw particularly strong traction in delivery sales. In the first quarter, digital sales grew 101% year over year. Digital sales totaled $206 million during the first quarter and represented 15.7% of sales. Also, since the rollout of its “Smarter Pickup Times” technology, there has been a significant increase in digital orders and higher guest satisfaction. In 2018, the company enabled digitized make lines in more than 1,000 restaurants. It expects to roll it out in all restaurants by the end of 2019.