In a bid to expand its digital and delivery business, Chipotle Mexican Grill, Inc. CMG announced a partnership with Uber Eats. This nationwide delivery plan will enable customers to order Chipotle food through the Uber Eats app as well as ubereats.com. Along with this partnership, the company also initiated tamper evident packaging seal to ensure safe food delivery. Notably, this partnership is likely to enhance the delivery experience of its customers.
Chris Brandt, chief marketing officer at Chipotle, stated, "We're excited to expand our delivery footprint through a partnership with Uber Eats, which will make it even easier for fans to get the food they love without leaving the house."
Enhanced Delivery & Strong Digitalization Bodes Well
Considering rapid digitization in U.S. fast-casual restaurant sector, an increasing number of restaurants are deploying technology to enhance guest experience and drive traffic.
Notably, Chipotle is aggressively trying to make digital ordering more appealing to customers and more efficient for its restaurants to drive digital sales as well as retain customers. In this regard, the company redesigned and simplified its online ordering site, enabled online payment for catering, customized online meal as well as collaborated with several well-known third-party providers for delivery.
During fourth-quarter 2019, digital sales surged 78% year over year. Digital sales totaled $282 million and contributed 19.6% to sales. Since the rollout of its ‘Smarter Pickup Times’ technology, there has been a significant increase in digital orders and higher guest satisfaction. Digital orders increased to more than $1 billion dollars in 2019.
Meanwhile, Chipotle is proceeding with its plans to enhance delivery system. It is also updating to new in-restaurant features to increase convenience for customers and delivery partners. In 2020, the company plans to add a Chipotlane — a drive-thru pick-up lane — that will enable guests to pick-up digital orders without leaving their cars.
Although, Chipotle is constantly trying to connect with its customers to retrieve their trust and loyalty as well as bring them back to stores, high marketing and promo expenses are hurting profitability. Moreover, costs to support the company’s newly-designed food safety program are likely to put pressure on margins as well. Notably, shares of the company have declined 30.2% in the past year compared with the industry’s fall of 31%.
Zacks Rank & Other Key Picks
Chipotle currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Few other better-ranked stocks in the same space are Cracker Barrel Old Country Store, Inc. CBRL, Brinker International, Inc. EAT, and Chuy's Holdings, Inc. CHUY. Cracker Barrel sports a Zacks Rank #1, while Brinker International and Chuy's Holdings carry a Zacks Rank #2.
Cracker Barrel has trailing four-quarter positive earnings surprise of 7.8%, on average. The company’s earnings beat the Zacks Consensus Estimate in all of the last four quarters.
Brinker International has an expected three-five year earnings per share growth rate of 6.5%.
2020 earnings for Chuy's Holdings are expected to rise 7.7%.
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