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Chipotle’s profit misses estimates as COVID-19 costs mount

FILE PHOTO: The logo of Chipotle Mexican Grill is seen at the Chipotle Next Kitchen in Manhattan

(Reuters) – Chipotle Mexican Grill Inc on Tuesday missed Wall Street estimates for quarterly profit, hurt by costs related to keeping its business running during the COVID-19 pandemic, with the burrito chain’s shares falling nearly 2% in after-hours trading.

Strong digital operations at the fast-casual chain, a standout performer in the industry during the coronavirus, have helped it ride out the worst of the impact, even as its expenses have climbed as it bolsters its delivery network.

Digital sales rose nearly three-fold and drove a 5.7% rise in comparable sales, helped by a surge in online orders in some parts of the United States.

Total revenue increased 11.6% to $1.6 billion for the fourth quarter ended Dec. 31, the company said.

Excluding one-time items, the company earned $3.48 per share, missing the estimate of $3.73, according to IBES data from Refinitiv.

“It is now well established that November was weak across the space, and while Chipotle is resilient, it is not immune,” Piper Sandler analysts wrote in a note after earnings report.

The company’s share price was up more than 10% so far this year and rose 66% in 2020 – by far the best-performing stock in the restaurant industry, according to Credit Suisse.

Its success came partly from its ability to ramp up digital sales quickly during the pandemic. For the full-year 2020, Chipotle’s digital sales grew 174.1% to $2.8 billion and made up 46.2% of sales. About half of digital sales were for delivery orders.

The chain is testing quesadillas, as well as smoked brisket, after its January nationwide launch of cilantro-lime cauliflower rice for a limited time.

Chipotle has not been providing sales forecasts during the pandemic. However, for 2021 it said it expects to open 200 new restaurants and have an effective tax rate between 25% and 27%.

About 70% of its new restaurants will include “Chipotlane” digital drive-thrus. Sales at locations with Chipotlanes are 10 about 10% higher on average than those without, Chief Technology Officer Curt Garner told Reuters in an interview.

The company is also testing out “carside” pickup, where an employee brings orders out to a customer’s car, in 29 restaurants.

“What we’ve seen so far has been really encouraging,” Garner said.

(Reporting by Nivedita Balu in Bengaluru; Additional reporting by Hilary Russ in New York; Editing by Anil D’Silva, Dan Grebler and Richard Pullin)

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