Chipotle Mexican Grill wowed Wall Street earlier this month when they released an earning report showing that the company's quarterly revenue had exceeded pre-pandemic levels and company estimates. The boost in sales was driven by a return to dine-in eating by Chipotle customers.
Based on surveys by Refinitiv, Chipotle's second quarter earnings per share came in at $7.46 adjusted compared to the $6.52 expected by analysts. Meanwhile, the company reported $1.89 billion in quarterly revenue, with $1.88 billion expected. Net sales in the second quarter rose by 38.7%.
While initially lockdown measures drove Chipotle sales down, it has flourished during the pandemic, with digital sales more than doubling late last year. In the first quarter of this year, digital sales surpassed in-person orders for the first time in the company's history.
"I fully expect the percentage to probably go down a little bit as the dining rooms come back," Niccol told CNBC on July 20. "The thing that I keep an eye on are the absolute dollars that we're doing in our digital business."
Currently, dine-in sales stand at roughly 70% of their 2019 levels, while digital orders remain up by 80% year-over-year.
On the earnings call, CEO Brian Niccol said that the company hopes to expand its current 2,803 restaurants to 6,000 locations over the long term. Among its possible plans for expansion are "a few hundred" more Chipotle franchise locations in Canada. 56 new franchises were opened in the second quarter, according to the report.
One area that may see growing investment from the company is its "Chipotlanes", or drive thrus for digital orders. According to company executives, stores with these drive-thrus see 20% higher sales compared with those without.
Despite the glowing report, investment experts say that Chipotle still isn't a sure bet. According to Neil Patel of The Motley Fool, even if the company meets all of Niccol's goals, it's expected to maintain a "modest" annual return.
"Of Course, the company could continue executing beyond expectations... [but] there appears to be no margin of safety inherent in the stock price today." Patel writes. "Given the company's current valuation, it would be difficult to achieve market-beating returns over the next decade even if you truly believed in the best-case assumptions."
Inflation could also play a role in Chipotle's investment prospects. According to the company's CFO, Jack Hartung, food costs may increase in the coming quarters due to high beef prices and freight rates, as well as staffing shortages at suppliers.
"Over the next few quarters, we'll have greater visibility on how much of this inflation is permanent versus transitory and we can take the appropriate actions as needed to help offset any lasting impacts," Hartung told CNBC.
Chipotle suppliers aren't the only ones facing employment shortfalls. According to data from the U.S. Bureau of Labor Statistics (BLS), restaurant, bar, and hotel workers have been quitting in the rates not seen in decades. Suffering under low wages, exhausting work, and usually no benefits, roughly 5% of this workforce has quit every month this year.
During the pandemic, these "frontline workers" faced more than just the risk of COVID-19 at work. Harassment and even physical attacks skyrocketed, in large part due to the fact that these workers became the de facto enforcers of mask-mandates.
Now, as worker shortages put added stress on those who remain, impatient customers have been complaining more and more. One Massachusetts restaurant was forced to close on a "Day of Kindness" earlier this month after angry customers drove servers to tears, with one customer telling workers "I hope you get hit by a car."
Currently, Chipotle is one of a growing number of fast-food chains offering workers higher wages, with their workers earning a minimum of $15 per hour.
