Shares of Chipotle Mexican Grill, Inc. (NYSE:CMG) have been rallying this year, gaining 6.25% year-to-date, thanks to the signs of recovery that its fourth-quarter results showed. However, the CMG stock rally has slowed down in March after Bill Ackman’s Pershing Square Capital Management filed a prospectus with the Securities and Exchange Commission that the hedge fund may sell its holding in the stock from time-to-time.
Although the filing said that there was no imminent plan to sell Chipotle stock, filing such document just months after announcing the stake in the burrito chain is unlikely to instill confidence.
It shouldn’t come as a surprise that CMG stock is down by over 4% so far in March. As of the end of February, Chipotle stock had gained over 11% since the beginning of the year.
The good thing about the slowing rally is that is creates an opportunity for investors interested in CMG stock to get into positions at a lower price. The company’s improved comparable store sales and digital innovation are two near-term catalysts.
CMG Stock: Improving Comps
Chipotle’s established locations had a nightmarish 2016 with company-wide comps falling by more than 20% for the year. The fourth quarter of 2016 showed signs of recovery with just a 4.8% decline in comps thanks to 14.7% comps growth in December alone.
During its most recent earnings call, CMG revealed that comps grew by 26% in the first 28 days of January and 24.6% throughout January. Chipotle achieved this despite January seeing the lowest promotional activity over the preceding 12 months. It said the comps rebound was driven by the improved average amount customers spend per visit.
The company is currently working on its largest advertising campaign ever, which is expected to launch in April. CMG declared during the last earnings call that it had partnered with two agencies — Venables Bell to oversee advertising and MullenLowe Mediahub to oversee media planning and media buying.
The campaign is going to focus on how taste and ingredients distinguish Chipotle from its competitors in a bid to attract new customers. The burrito chain is also using brand marketing to engage existing customers by letting them know about its “commitment to serving delicious food made from ingredients raised responsibly,” according to CEO Steve Ells.
Going by the details of these campaigns, it’s clear that the motive here is to instill confidence in customers regarding CMG.
Chipotle has also been making moves to take customer experience to another level. Ells said the company was planning to update the burrito chain’s Restaurateur program, due for rollout a week after the last earnings call.
The Restaurateur program identifies and rewards CMG’s best-performing managers. Ells said the update would align the restaurateur status to elements that directly measure customer experience. Needless to say, just about every CMG manager would work hard to improve the customer experience.
The upcoming marketing campaign and the updated Restaurateur program have a good chance of fostering a year of comps growth at Chipotle.
Chipotle Stock: Digital Investments
Chipotle announced the successful rollout of its “Smarter Pickup Times” technology at every CMG restaurant that offers online ordering. The technology allows customers to place digital orders and experience shorter and more accurate pickup times, while also offering the capability to book a regular future pickup time for an online order.
This is an initiative way to avoid crowed checkout points due to mobile ordering, as in the case of Starbucks Corporation (NASDAQ:SBUX). In fact, the burrito chain boasts that the technology cuts digital order wait times by 50%.
The company also created an extra make-line at the back of CMG locations that offer digital ordering. This allows digital orders to be processed while avoiding crowded lines at the checkout. With this, its mobile ordering initiative is well positioned to aid the ongoing recovery of Chipotle stock. Combine this with the planned marketing campaigns as well as its customer experience investments, and CMG stock definitely looks attractive in 2017.
As of this writing, Craig Adeyanju did not hold a position in any of the aforementioned securities.