- As many restaurants continue to struggle amid the pandemic, Chipotle Mexican Grill's digital sales are tripling, according to its second quarter earnings report, released Thursday. Currently up 200% from this time last year, digital sales account for more than half of the chain's overall sales. CFO Jack Hartung expects this trend to continue, he told Yahoo Finance Friday.
- "Over the last few years, we've seen the more convenient access we give to our customers, the more they come back," he said. "As we've reopened dining rooms, we've retained 80 percent of our digital gains from April and May. I think that’ll last not just through the pandemic, but beyond. The convenience factor is big for our customers."
- Hartung said Chipotle is continuing its experimentation with delivery options, which can be prohibitively costly to restaurants. "Delivery comes with a cost, and restaurants usually can't cover it," he said. "Some of our peers charge higher menu prices for delivery, but we're not doing that. We want to find out where customers are most comfortable."
Hartung said Chipotle has no plans to downsize, despite their number of restaurants and amount of sales volume that comes via the Chipotle app. "Our restaurants are already fairly small," he said. "Those of our peers are quite a bit bigger. Our dining rooms are much smaller than our kitchens. And when this pandemic is over, we think many of our customers will want to sit down."
California is among the biggest Chipotle markets, and a spike in COVID-19 cases has led Gov. Gavin Newsom to reinstate dine-in restrictions to curb infection rates. Hartung said the mandate's effect on business has been negligible.
"Virtually all our California restaurants have patio seating and pickup options," he said. "The reality is, even in the areas with open dining rooms, the vast majority of our customers who order inside take their food to go, so this is not having an impact on us at all."
Hartung also mentioned how supply chain operations are impacting food prices, saying the differences won't be severe.
"We always ship our avocados from Peru right around now, because we have a great business agreement with them," he said. But due to the pandemic, Chipotle is shifting to a more expensive Mexican supplier. "We want to signal to Wall Street investors that we'll have a rise in food cost because of that switch," he said. "But it's nothing we can't take care of."
Last month, Hartung told CFO Dive the company has $900 million in cash, a holdover from its IPO, which it has yet to spend. Per the press release, at the end of the second quarter, that figure has grown to $935 million. Hartung told Yahoo the company has no plans to dip into those reserves yet.
"Right now, we're keeping it as a safety net," he said. "We're fortunate to have such a strong balance sheet. We have a long-term view of what we want to accomplish at Chipotle, including doubling our U.S. restaurant count. When we hit a challenge like this, we want to keep investing in growth, people, and better quality. Until things stabilize, we're holding onto that."
Hartung said he's considering returning cash to shareholders, potentially in terms of buybacks. But the company is currently in growth mode, he said, and there are no discussions of dividends at this time.