Brian Niccol’s tenure at Chipotle Mexican Grill is off to good start.
Shares of the company jumped 10 percent on Wednesday after the company posted better-than-expected earnings, on the back of price hikes, which it began to institute last April.
The average check size rose 4.9 percent during the quarter, helped by the higher prices. That was partially offset by fewer transactions in its restaurants. Chipotle initiated the final wave of increases in January, bumping up prices by 5 to 7 percent in markets that did not already see increases in 2017.
Wednesday’s earnings report marked the first time that Niccol addressed Chipotle investors. He left his post as CEO of Taco Bell to take over the beleaguered burrito brand, inheriting a company that has suffered from a three-year sales slump.
The hope is that Niccol, who joined the company on March 5, can revitalize the brand. He has a reputation for marketing and technology innovation, two key areas that have not been a top priority for Chipotle. At Taco Bell, he introduced mobile order and pay, repositioned the Mexican chain as a lifestyle brand and pushed for more ingenuity in the kitchen.
During the earnings conference call, Niccol said Chipotle will be focusing heavily on digital, marketing and menu innovation. He told investors that he would share more detail about Chipotle’s plan during a call ahead of the second-quarter earnings report.
In the first quarter, Chipotle said net income rose to $59.4 million, or $2.13 per share, up from $46.1 million, or $1.60 per share, in the year-earlier period. Analysts had expected Chipotle to report earnings of $1.57 per share, according to Thomson Reuters.
Total revenue climbed 7.4 percent to $1.15 billion, in-line with analyst expectations.
Same-store sales for the quarter were up 2.2 percent, higher than the 1.3 percent analysts had expected, according to StreetAccount.
As the company embarks on the next phase of its turnaround under Niccol, investors will want to see if he can boost customer traffic.
“One of [customers’] biggest complaints frankly is access to the brand,” Niccol said. “The brand is not that convenient.”
Niccol said that customers want mobile ordering and delivery, but that about half of them don’t know that Chipotle is starting to implement these things.
The new CEO has already made some changes at the company. Chipotle, which has been slow to promote national television campaigns in the past, has created several light-hearted new ads that focus on the chain’s “real” ingredients.
Refreshing Chipotle’s messaging and image are key components of Niccol’s turnaround plans. In particular, he wants to remind customers why they love the brand and its food.
While there were some concerns that Niccol would have to compete with Steve Ells, the ex-CEO and founder of the company, who has remained with Chipotle as executive chairman, Ells did not speak during the earnings call.
Chipotle maintained its outlook for 2018, which calls for same-store sales to rise at a low-single digit pace. It also expects to open between 130 and 150 new stores. In addition, Chipotle said its board had authorized another $100 million in stock repurchases.