- Chipotle crushed Wall Street's estimates for its fourth-quarter earnings.
- The company is staging a comeback focused on digital investments, including testing its Chipotlanes and decreasing delivery time.
- CEO Brian Niccol told analysts that labor inflation is its biggest challenge in 2019.
The company credited more foot traffic and price increases with boosting sales. The company is in the middle of staging a turnaround after a series of high-profile food safety issues resulted in customers turning away from the brand and it fell behind the competition.
Here are the key takeaways from the company's earnings as it looks to continue its comeback in 2019.
Since CEO Brian Niccol took the reins in March, the company has been focusing its attention on driving digital sales, which made up 12.9 percent of its revenue this quarter. Chipotle plans to continue that strategy in 2019 as it prepares its restaurants to better handle an influx of online orders by investing $90 million in related initiatives.
For example, the company has already installed pick-up shelves to display online orders in 1,000 of its locations so far. By the second half of this year, Chipotle wants them in all of their restaurants. The Mexican-food chain is also on pace to have a second assembly line in all of its kitchens for online orders only by the middle of the year.
A pick-up lane just for online orders could be coming soon to a Chipotle near you. The company is testing drive-through windows in 10 of its restaurants for customers to pick up their online orders. The "Chipotlanes" are meant to decrease lines inside the store and increase the convenience for the customer.
Niccol said that although the test is still in the early stages, the company is already seeing the drive-through windows help boost both digital and overall sales for the restaurants that already have it installed. The company is planning to add a few dozen more "Chipotlanes" this year.
Chipotle said that it's already one of the fastest restaurants when it comes to delivery, but it wants to become even faster in 2019. The restaurant has partnered with third-party delivery service Doordash to bring its food to customers' doors.
Niccol told analysts on the conference call that Chipotle consistently has one of the top delivery times in Doordash's system. With the addition of pick-up shelves and a second assembly line, drivers will be able to pick up burrito bowls much faster.
Niccol told analysts that the company sees labor inflation as its biggest challenge this year, forecasting a hike of 4 to 5 percent.
More than 20 states across the country will raise their minimum wage in 2019. Chipotle's employees rely on an hourly wage, not tips, which puts pressure on the company's margins. Niccol said that the company has been more efficiently scheduling its workers since the third quarter and that it hopes that will continue boosting profit margins through the year.