How Chipotle Aced Its Pandemic Test

After its sales initially sank at the start of the pandemic, Chipotle Mexican Grill (NYSE:CMG) turned out to be one of the biggest winners in the restaurant sector thanks to its ability to pivot to digital and delivery, the expansion of its drive-thru concept, Chipotlanes, and a rewards program that now has more than 21 million members.

In this Motley Fool Live video segment recorded on July 2, contributor Jeremy Bowman, speaking with Corinne Cardina, bureau chief of healthcare and cannabis, explains how Chipotle thrived during the health crisis and what’s in store for it in the aftermath.

Jeremy Bowman: Sure. One company I was really impressed with during the pandemic was Chipotle, going back to last March is so. Now Chipotle is the company I think is dependent on your lunch time, work traffic, or maybe students-that sort of thing. I thought they were going to have a tough time. Initially, their comparable sales really tumbled like most of the restaurant industry, but they were able to pivot really quickly to digital and delivery. By June of last year, their comparable sales were already in positive territory. They started offering free delivery and they are doing some perks there to attract business. But I think their model works really well with the digital interface. I think most quarters in the pandemic, a majority of their sales came in digitally. The stock’s about tripled since then. Their first-quarter report was great. They have even thrown in new restaurant items that are digital-only like the quesadilla. I mean, I think they’re a company that’s really just executing on a lot of levels and they’ve really outperformed what you would’ve expected them to do given the difficulties of pandemic. Their loyalty program has also reached 21 million people now. That’s certainly good to have.

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Corinne Cardina: We have people who love Chipotle, I mean, they definitely have a close following.

Jeremy Bowman: Yeah. I’m a big fan of Chipotle, so I have a small stake in them as well, so I’m happy to see them doing well on multiple fronts. They have also gotten into drive-thrus which they call Chipotlanes. That’s been-

Corinne Cardina: Chipotlanes

Jeremy Bowman: Yeah. Restaurant chains like they come up with cover puns whenever they can. I don’t know if that’s anything their customers are using, but that’s the management term. But yes, so I think majority of their new store openings going forward are going to have a drive-thru in it. That’s great. That was also something they couldn’t do without the digital interface because if you think of it when you walk into a Chipotle, you go down the assembly line and order your beans and peppers and whatnot from the steam table so it didn’t work as well as some other drive-thru concepts. Now that they have the digital ordering really, you can just pull up and they’ll pass your order at the window like any other drive-thru business. I mean, I think for all those reasons the future is still really bright. A lot of restaurants stocks are expensive today. Chipotle is one of them, but I think as far as the business, it certainly looks great.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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