There were several factors driving Chipotle’s strong second quarter results, including its chicken al pastor launch, value proposition, and focus on throughput. The quarter also benefited from what Chipotle calls “burrito season,” which is its peak sales season.
Indeed, Chipotle recorded its best sales and digital sales day ever for this year’s National Burrito Day, which was April 4. During the company’s second quarter earnings call Wednesday, CEO Brian Niccol said the promotion also drove an influx of new and lapsed customers and was the best enrollment day so far this year for the Chipotle Rewards program.
Each year, burrito season (March to May) has provided a dependable – and predictable – tailwind for the chain. Chipotle even hired 19,000 more workers this year to ensure demand for the season was fulfilled. Of course, the restaurant business isn’t typically so dependable or predictable, and it may be even less so in a post-COVID environment. Consider, for instance, Chipotle’s comparable sales moderating to the 6% range in June and July, from an 11.1% range in Q2. Niccol said this trend was driven in part by a “seasonal move with the summer change of behaviors.”
“Obviously, we’re trying to understand what that looks like because it appears to be a new trend since coming out of COVID,” he said.
Chief financial officer Jack Hartung expanded on what exactly this “new trend” is, stating that consumers seem to be vacationing longer. July has historically been a challenging month for chain restaurants because consumers do tend to travel more and are therefore out of their routines. Travelers also tend to gravitate toward independent concepts when they’re visiting a new location. Those habits seem to be coming into play so far in the third quarter, as U.S. airline companies have collectively predicted a record-setting summer travel season, while AAA also reported record-breaking travel throughout the week of July 4.
“July 4 used to be a weekend and now it looks like it’s two weekends. Now it just seems like the holidays … are stretching out a little bit,” Hartung said. “We even saw for the first time ever on Juneteenth, a little softness there as well … Last year, vacations were really pulled forward. This year, vacations were pulled forward again, so there’s difficulty in predicting the seasonality.”
The COVID-induced work-from-home trend has also impacted business, Hartung added. The Pew Research Center reports that about 22 million U.S. adults – or 14% – work from home all the time, while about 41% of Americans work on a hybrid schedule.
“It looks like a combination of there’s a holiday and then work from home is more acceptable,” Hartung said. “The last couple of summers have been very hard to predict so we think that’s a big part of what we’re seeing [with moderating comps].”
Contact Alicia Kelso at [email protected]
