Though many industries have been hard-hit by the coronavirus pandemic, restaurants have struggled exponentially, especially in light of restrictions and limited operating capacity. But on the flipside, fast casual joints like Chipotle (NYSE: CMG) have done exceedingly well in the course of the pandemic. And now, Chipotle is making plans to build on its success by expanding its footprint.
A solid first quarter
Chipotle released its first-quarter earnings in late April, and investors were pleased. Earnings per share came in at $5.36 versus the $4.89 Wall Street expected. Meanwhile, revenue came in at $1.74 billion, which met analysts' expectations.
Chipotle also recorded a net income of $127.1 million, or $4.45 per share. That's up from $76.4 million, or $2.70 per share, a year prior. Same-store sales for Chipotle rose 17.2% compared to a year prior, and they were up 21% from 2019 levels. Not a bad pandemic performance.
Factors in Chipotle's success
Several factors helped boost sales and income for Chipotle at a time ridden with economic uncertainty. For one thing, Chipotle introduced new menu items, like cauliflower rice, that not only cost extra but gave customers more options to choose from.
The company also saw a major boost in digital orders, which helped boost revenue, since digital orders are more profitable than delivery or in-person orders. All told, online orders more than doubled during the quarter and made up 50.1% of Chipotle's total sales.
The company also credits stimulus checks for part of its success. In late December, a round of $600 checks was approved, and consumers largely received that money throughout January, giving them the option to spend it throughout the quarter. A second round of stimulus checks worth $1,400 was approved in mid-March, though that may not have boosted sales for Chipotle during the first quarter the same way the previous stimulus round did due to the timing of those $1,400 checks.
More locations in the works
At a time when so many restaurants are shutting down, real estate investors are worried that widespread vacancies will deprive shopping centers and malls of much-needed revenue -- so the fact that Chipotle is making plans to branch out is a good thing. Chipotle opened 40 new locations during 2021's first quarter, more than half of which included drive-thru lanes for digital order pickups. The company expects to open about 200 new locations this year alone, which could help fill empty slots in shopping centers desperate for tenants.
Chipotle is also playing around with the idea of opening digital-only restaurants -- it announced its first such endeavor late last year. If digital sales continue to soar, this will be a sensible avenue for Chipotle to pursue since these orders are so profitable. While digital-only stores take up less square footage than traditional Chipotle restaurants, the fact that there's interest is still good news for real estate investors.
That said, as things improve on the pandemic front, Chipotle diners may increasingly seek to return to in-person dining, and digital orders could slide. We should know more about this trend later on in the year, but either way, the fact that Chipotle is thriving at a time like this should give real estate investors something to get excited about.