Bill Ackman Comments on Chipotle Mexican Grill

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Mar 29, 2021

Chipotle (CMG, Financial)

Chipotle's superb 2020 performance amid a challenging backdrop was due to the successful business transformation led by CEO Brian Niccol and his team. Improved digital access, which has been a pillar of management's transformation strategy and a growing sales driver in recent years, enabled the company to serve customers with digital pickup and delivery as the pandemic began. Only three months after the onset of COVID-19 in the U.S., Chipotle returned to growth, achieving same-store sales growth of 6% in Q4, or 20% over two years.

The pandemic accelerated a shift in the company's digital sales mix from just under 20% of sales at the end of 2019 to 70% in April, before settling to about 50% in July, a level which has been maintained through the start of 2021. Management believes that the majority of these digital sales are incremental, noting that in the 60% of stores with dining rooms open, 80% to 85% of digital sales gains are being retained while 50% to 60% of in-store sales have been recovered.

Management remains confident that the company will emerge even stronger from the COVID-19 pandemic as it continues to execute on a number of long-term strategic initiatives. Chipotle plans to open 200 new restaurants in 2021, a 24% increase from 2020 opening levels, with more than 70% of these new locations featuring a Chipotlane, the company's high-return, digital drive-thru format.

Chipotle has already launched two new menu innovations in 2021, including cauliflower rice, which was introduced in January and has garnered very favorable early feedback, and the much-anticipated quesadilla, which was launched as a digital-only menu item on March 11th. Chipotle Rewards, a highly effective marketing tool for the company, continues to see enrollment growth with over 19.5 million members as of year-end, compared to 8.5 million members at the end of 2019.

Chipotle is extremely well positioned to execute on the company's long-term strategy, which should drive substantial shareholder value in the future.

From Bill Ackman (Trades, Portfolio)'s Pershing Square 2020 annual shareholder letter.