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UPDATE 3-Chipotle sales beat expectations on new items, digital ordering

Hilary Russ

(Adds quote from CEO interview; new store build numbers)

NEW YORK, Oct 22 (Reuters) - Chipotle Mexican Grill Inc reported higher-than-expected quarterly sales on Tuesday, boosted by new menu items and expanded drive-up, delivery and digital ordering options.

Comparable sales at stores open for at least 13 months rose 11% in the third quarter ended Sept. 30, beating analysts' estimate of 9.27%, according to IBES data from Refinitiv.

Revenue grew 14.6% to $1.4 billion year over year, beating analysts' expectations for a 12.7% increase to $1.38 billion. Store traffic was 7.5% higher.

The Newport Beach, California-based Mexican fast-casual chain also reported adjusted earnings per share of $3.82, a full 60 cents above a mean forecast of $3.22, according to Refinitiv data.

Chipotle's share price has nearly doubled so far this year, even as the restaurant industry has faced pressure from increasing competition.

The company has continued to recover from its E. Coli bacteria outbreaks that sickened customers in 14 states through early 2016.

Chief Executive Brian Niccol, who was brought on board in February 2018, struck a modest tone about the positive news during a call with investors.

"We are still in the early stages of our journey, and we need to stay focused on our priorities," he said. "I couldn't be prouder of where we are, but I'm also really excited about where we're going."

Digital sales - including orders through its app, delivery partners and online - took off, growing nearly 88% in the quarter and accounting for 18.3% of total sales.

Net income rose to $98.6 million, or $3.47 per share, from $38.2 million, or $1.36 per share, a year earlier.

The company reduced the number of expected new store openings this year, but "only because we are building a really big pipeline for next year," Niccol said in a phone interview after the earnings call.

That is partly because it shifted its real estate strategy to build on the early success of "Chipotlanes," or drive-thru pick-up lanes for customers that have already placed and paid for an order digitally.

About half of the more than 80 new restaurants under construction will include Chipotlanes by the end of 2019. For 2020, the company plans to open another 150 to 165 new locations, with more than half having Chipotlanes.

At the end of the quarter, it had 2,546 locations.

The company's new loyalty program, launched in March, has enrolled 7 million members, Niccol said.

Traffic, including new customers, was also driven by a new steak menu item called carne asada. Supplies of the limited-time offering will run out by early December.

In test markets, "when we removed the carne asada, we saw people continuing to have the Chipotle experience," Niccol said. (Reporting by Nivedita Balu in Bengaluru and Hilary Russ in New York; Editing by Richard Chang and Sandra Maler)