2016 was a tough year for Chipotle Mexican Grill, and the burrito chain hounded by food-borne illnesses has some major bouncing back to do.
After the year that CEO Steve Ells dubbed as “the most challenging we’ve ever faced in our 23-year history” — or when a highly publicized E. coli outbreak caused them to plunge around the end of 2015 — Chipotle store sales recovered last December 2016 for the first time in over a year.
Brighter Days For Burrito
The company disclosed 2016 sales of $3.9 billion, dropping 13 percent from the previous year. Fourth-quarter revenue increased 3.7 percent to $1.03 billion from one year earlier, but per-share earnings decreased to 55 cents per share from $2.17 a year ago due to higher labor and food cost increases.
Comparable sales are on the right track despite reflecting a 30 percent drop from the previous-year period, so the Chipotle management is bent on maintaining the momentum in revenues (achieving high-single digits this year) while saving $100 million in costs.
In its strategy discussed in a conference call last Thursday, Feb. 2, Chipotle vowed to refocus its energy on the “guest experience.”
“In the upcoming year we intend to continue to simplify and improve our restaurant operations, utilize creative marketing to rebuild our brand, and further the roll-out of our digital sales efforts,” said Ells in a statement.
The chief executive expressed confidence in the chain’s future, saying he is encouraged by the results of efforts to simplify operations and ensure the delivery of an “extraordinary dining experience.”
Beefing Up Marketing, Digital Orders
Chipotle is setting its sights on better marketing and digital orders. In its bid to bring back its former customers, it is targeting about 60 million individuals who have either altogether stopped visiting its stores or visit less frequently. Ells said they are pleased at the rate of converting new or lapses customers into regular ones in the second half of last year.
While channeling smaller funds into marketing and promotions as a percent of sales, the chain will more consistently run its ads this year. It will also debut a scripted TV series for children that emphasizes real ingredients.
Chipotle is also enhancing its digital ordering technologies, recently started to promote more user-friendly tools. In December 2016, more accurate pickup times debuted in over 1,000 stores, with the rest of its branches getting equipped with this capability in the first quarter of this year.
To respond to the influx of orders coming from mobile and digital platforms, the burrito leader seeks to add $2 million in added labor to its stores.
The chain is also stressing to its workforce the need for the best possible customer service, particularly in the face of making a frequent visitor out of every customer. It is also tweaking its hiring process, where all store workers used to be required to meet every job candidate, a move that pulled people off the service line at busy hours of the day.
Will patrons also see changes on the Chipotle menu? Not really, as new menu items will not be a significant part of the business today given its drive for simplicity and faster lines inside stores. Chipotle, however, is currently testing a dessert item that adds a single ingredient not already found in stores.
Higher prices too are not to be anticipated in the short term, the company added during the call.
