Key Points
Chipotle's drive-thrus are a big hit among time-strapped consumers.
Management is confident that new store openings will continue to generate lucrative returns.
Shares of Chipotle Mexican Grill (NYSE: CMG) climbed on Thursday after the restaurant chain lifted its full-year sales growth forecast.
Image source: The Motley Fool.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
Speed and convenience drive growth
Chipotle's revenue rose 9.3% year over year to $3.3 billion in the second quarter, fueled by store openings and rising sales at existing locations.
Comparable restaurant sales, which include revenue from company-owned stores open for at least 13 months, grew 2.2%.
The burrito maker also opened 100 company-owned restaurants during the quarter, 80 of which feature the company's popular Chipotlanes. Management credits these fast and convenient drive-thru pickup lanes for pre-paid digital orders with boosting sales and profits at its restaurants.
Digital sales increased to 38.3% of Chipotle's total food and beverage revenue, up from 35.5% in the year-ago quarter.
Still, higher beef, freight, and labor costs dented Chipotle's profit margins. Restaurant-level operating margin declined to 25.2% from 27.4% in the prior-year period, while companywide operating margin fell to 15.7% from 18.2%.
All told, Chipotle's adjusted earnings, aided by stock buybacks, were flat at $0.33 per share.
New restaurants are highly lucrative
However, investors were heartened by Chipotle's raised guidance. The company now expects full-year same-store sales growth in the low-single-digit range, up from a prior forecast of flat comps.
Chipotle also plans to open a total of 350 to 370 restaurants in 2026, as new stores continue to produce strong cash-on-cash returns of roughly 60% by their second year of operation.
"Opening a Chipotle nearly every day of the year is no small feat, but the results give us confidence that our talent and real estate pipelines can support this level of growth while preserving the strength of our existing restaurant base," chief financial officer Adam Rymer said during a conference call with analysts.
Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill. The Motley Fool recommends the following options: short September 2026 $35 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.