Chipotle shares increased 10 percent after it reported better-than-expected earnings in the wake of price hikes, which the company started to implement last month, indicating a good kick-off for Brian Niccol’s tenure.
The average check size grew 4.9 percent during the quarter, supported by the higher prices. However, this was partially offset by less number of transactions in its restaurants. In January, the businesses rolled on its final wave of price increases, scaling up prices 5 to 7 percent in the markets that have not seen the increases kicked off in 2017.
The earnings report came as Niccol addressed Chipotle investors for the first time. Niccol left his position as the chief executive officer of Taco Bell to take the helm at the struggling burrito brand, taking over a business that has seen three years of sales decline.
Niccol joined the company on March 5, and since then hopes have been raised that he could revive the brand. Niccol has a reputation for the innovation of technology and marketing, which are two areas that have not made it up to the list of Chipotle priorities.
During his stay in Taco Bell, Niccol introduced a system where customers can order and pay through their mobile devices. He had also paved the way for the pivot of the Mexican chain from food to a lifestyle brand, while also accomplishing more ingenuity in the kitchen.
In his earnings conference call, Niccolo said that Chipotle will aim to focus more on the improvement of their digital, menu, and marketing systems. He also told the investors that he would disclose more details on the company’s plans ahead of the earnings report for the second-quarter.
During the first quarter, Chipotle reported a net income that reached $59.4 million, or $2.14 per share. This was higher than the $46.1 million, or $1.60 per share, that was recorded last year. Additionally, this figure beats analysts’ estimates of $1.57 per share.
The company’s total revenue soared 7.4 percent to $1.15 billion, which is just what analysts expect.
Meanwhile, same-store sales for the quarter were 2.2 percent higher. This also topped analysts’ estimates of 1.3 percent.
As the company proceeds to the next stage of its turnaround plan under Niccol, investors keep close tabs if he could boost customer traffic.
“One of customers’ biggest complaints frankly is access to the brand,” said Niccol. “The brand is not that convenient.”
He also added that customers crave for mobile ordering and delivery. However, he said that half of the customers are not aware that the business has started to implement those services.