Brian Niccol
Chairman and Chief Executive Officer at Chipotle Mexican Grill
Thanks, Cindy, and good afternoon, everyone. Before I begin discussing our results, I need to recognize and congratulate Jack Hartung on his nearly 25 years with Chipotle and roughly 80 earnings calls with all of you. I want to thank him for being a great friend, a terrific leader and a champion for our purpose and brand. I'll say a few more words about Jack and Adam before I hand it over to him.
Now turning to our results; the second quarter was outstanding as successful brand marketing, including the return of Chicken al Pastor as a limited time offer drove strong demand to our restaurants. Additionally, our focus and training around throughput paid off as we were able to meet the stronger demand trends with terrific service and speed in -- driving over an 8% transaction comp in the quarter. For the quarter, sales grew 18% to reach nearly $3 billion driven by an 11.1% comp. In-store sales grew by 24% over last year. Digital sales represented 35% of sales, restaurant level margin was 28.9%, an increase of 140 basis points year-over-year.
Adjusted diluted EPS was $0.34, representing 36% growth over last year, and we opened 53 new restaurants, including 46 Chipotlanes. Before I give an update on our five key strategies, I want to take a minute to address the portion concerns that have been brought up in social media. First, there was never a directive to provide less to our customers. Generous portion is a core brand equity of Chipotle. It always has been, and it always will be.
With that said, getting the feedback caused us to relook at our execution across our entire system with the intention to always serve our guests delicious, fresh, custom burritos and bowls with generous portions. To be more consistent across all 3,500 restaurants, we have focused in on those with outlier portion scores based on consumer surveys, and we are reemphasizing training and coaching around ensuring we are consistently making bowls and burritos correctly. We have also leaned in and reemphasized generous portions across all of our restaurants as it is a core brand equity of Chipotle.
Our guests expect this now more than ever, and we are committed to making this investment to reinforce that Chipotle stands for a generous amount of delicious, fresh food at fair prices for every customer, every visit. The good news is that we are already beginning to see our actions positively reflected in our consumer scores and our value proposition remains very strong. We believe our focus on operations, including throughput as well as terrific marketing and menu innovation, have strengthened the brand and our value proposition. And we will continue to listen to and treasure our guests to earn every transaction.
Now I will turn to our five key strategies that help us to win today while we grow our future. These strategies include running successful restaurants with a people accountable culture that provides great food with integrity while delivering an exceptional in-restaurant and digital experiences, sustaining world-class people leadership by developing and retaining diverse talent at every level, making the brand visible relevant and love to improve overall guest engagement, amplifying technology and innovation to drive growth and productivity at our restaurants, support centers and in our supply chain and expanding access and convenience by accelerating new restaurant openings in North America and internationally.
First, I will start with running successful restaurants. As I mentioned, the improvements we have seen in throughput positions us well to meet the strong demand we experienced in the second quarter, driven by what we call burrito season or our peak seasonality as well as the success of Chicken al Pastor. We often are asked why throughput is such an important operational KPI for Chipotle. So I thought I would begin by expanding on this. It is the outcome of a strong operational engine that delivers a great experience for our teams and our guests.
In order to deliver exceptional throughput, our restaurants need to be fully staffed and properly deployed. Our crew needs to complete all food prep on time and they need to be well trained to execute the four pillars. This results in a better overall experience for our crew, which leads to more stability and, therefore, more experienced teams that execute better every day. And for our guests, faster lines with hotter, fresher food.
This type of guest experience strengthens our value proposition and drive incremental transactions. Over the last year, we have improved our tools and training to deliver exceptional throughput. This included rightsizing the cadence of digital orders during peak periods and enabling our restaurants to see in real time at the point of sale, the number of entrees in each 15-minute interval. This has received tremendous feedback from our restaurant teams.
It has helped to accelerate momentum as it creates excitement and allows our teams to celebrate in a moment when they achieve their goal. And our GMs can coach in the moment when they fall short. In fact, one of our field leaders in New York have 5 of his 8 restaurants achieved their throughput goal in the second quarter, which compares to just one of his restaurants a year ago.
While we are seeing progress, we still have a lot of opportunity to increase the percentage of restaurants executing the four pillars. Expo is a great example as it is the most impactful pillar. As a reminder, Expo is the crew member between salsa and cash, who helps expedite the bagging and payment process. Restaurants within Expo in place are averaging five incremental entrees in their peak 15 minutes, yet we only see a little over half of our restaurants with Expo in place during peak periods. This is certainly better than where it was a couple of quarters ago, but it should be a lot higher.
The good news is that I strongly believe we have the right leaders in training in place to keep the momentum going as we continue to gather the data on the execution of the four pillars and provide feedback and coaching on a weekly basis, I am confident throughput can go much higher. This brings me to world-class people leadership. As we mentioned last quarter, crew and GM turnover is at some of the best levels I've seen since I joined the company. And the stability is allowing us to develop and grow our people pipeline to achieve our goal of promoting over 90% from within.
We have many inspiring stories at Chipotle of crew members who have grown with the company to become some of our top leaders. In fact, our recently promoted Regional Vice President started as a crew member 25 years ago. She moved to the United States at 14 years old without knowing English. At 19, she started working at Chipotle and has moved her way up, including spending time in a language development role supporting other employees at Chipotle to learn English as a second language. Her people-first mentality is what has made her so successful at hiring, developing and retaining many of our best leaders.
And she has two sisters that have each been with Chipotle for over 15 years and our top-performing field leaders. With the addition of her role, we now have 3 of our 10 regional vice presidents who started as crew members and have made their way up to leading a region and managing over a $1 billion business. These stories really do inspire our entire organization as the opportunity to develop and grow within Chipotle, along with our industry leading benefits and pay, enables us to attract and retain exceptional people.
In fact, as we look to expand to 7,000 restaurants in North America, we will be adding an RVP nearly every year along with hundreds of restaurant leadership roles. Finally, our 50-for-1 stock split, one of the largest in New York Stock Exchange history, enables our employees and others to purchase whole shares at more affordable prices and gives us more flexibility to compensate our top performers in stock, all with the goal to have more employees participate in the financial success of our company. It really is an exciting time to be part of Chipotle.
Now turning to marketing; the Chipotle brand continues to gain momentum as we focus on exceptional operations and making the brand more visible, more relevant and more loved. Chicken al Pastor is a great example as it once again surpassed our expectations, reaching over a 20% incidence rate and more importantly, driving incremental transactions and spend. Similar to carne asada, we proved that when we bring back a limited time offer, we were able to make it more delicious with seamless execution.
And while Chicken al Pastor will end later this summer, I am excited to share that we will be bringing back smoke brisket this fall for a limited time. Brisket was among the most requested in many items as our guests love the combination of smoke beef chart on the grill and finish with the brisket as me with smoky chili peppers. It took a huge cross-functional effort across supply chain, culinary finance and marketing to bring back this delicious LTO.
Our marketing team also continues to find creative ways to generate excitement and drive more engagement around our annual promotions. In the second quarter, we had a record-breaking National Burrito Day, where our gamified promotion resulted in Chipotle's best sales and digital sales day ever. It also drove an influx of new and lapsed customers and was the best enrollment day of the year for our rewards program. I'm also thrilled to share that later this week, team Chipotle will be visible on the world stage as we leverage our real food for real athletes platform for those competing in Paris.
We highlighted the inspiring journeys of Anthony Edwards, Sofia Smith, Taylor Fritz, Sarah Hughes and Jagger Eaton. Their Go-To Chipotle meals and how our ingredients have been a key component of their training regimens. We will also bring back our gold foil for burritos for a limited time in both North America and France to celebrate all the athletes competing. Shifting to technology and innovation; I want to provide an update on a few of our in-restaurant initiatives starting with the dual side of Grill.
Over the last year, the Grill has been in 10 restaurants, and we have received consistent feedback that our teams and our guests love it. The grill can cook the chicken and steak in under half the time it takes on the Plancha with consistent execution and the same sear and char. It also maintains better moisture resulting in juicier chicken and steak with less waste. And for our teams, it takes one of the most complex positions in our restaurants and significantly improves the learning curve.
Finally, for high-volume restaurants, it opens up capacity and drives efficiency during morning prep as chicken and steak can be closer to serving. We are in the process of rolling out the dual sided grill to an additional 74 high-volume restaurants this year, and we'll continue to evaluate the economics prior to rolling it out further across the organization. Additionally, our automated digital make line in Autocado are making their way through final checks ahead of being pilot tested in their first restaurant.
Our food safety and operation teams have worked closely with our technology teams to assure that the design takes into account things like cleaning, speed and accuracy as well as maintaining our high culinary standards. The next step will be to get each device into a restaurant to continue to learn and iterate as part of our stage gate process. I'm excited about each of these initiatives, and I strongly believe we will see some impactful back-of-house changes in the years to come, that will help to improve consistency in our restaurants and drive a better overall experience for our teams and our guests.
I'm also proud Chipotle continues to be a learning organization. Using the stage gate process is our way to drive discipline around what ultimately gets rolled out. I'm confident this process will further strengthen Chipotle as a leader in technology and innovation. Now moving to our final strategy, which is to expand access and convenience; in North America, we remain on track to open 285 to 315 new restaurants this year, and our openings remain strong across all markets. While our time lines remain consistent to last quarter, our development team continues to see groundbreaks meaningfully higher compared to last year which should help smooth the cadence of openings as we get into the back half of the year.
I also wanted to share an update on our partnership with the Alshaya Group. Our first restaurant in Kuwait has been open for several months and continues to have strong performance. The good news is that the feedback from guests is that the culinary experience is right on par with North America, which is fantastic to hear. It also tells me that when we execute our culinary and deliver an exceptional experience for our guests, Chipotle's brand resonates across geographies. We look forward to opening our second restaurant in Kuwait as well as expanding into Dubai with the Alshaya Group later this year.
To close, our crew members, GMs and field leadership delivered an excellent second quarter helped by our committed support centers that enable restaurants to better succeed. We are very fortunate to have a clear purpose and an organization that is full of talented people at all levels. It is exciting to see the progress we have made so far, and I am confident there is much more growth in front of us. Finally, I want to spend a few minutes reflecting on my time with Jack and his extraordinary 25 years at Chipotle. Jack is just as passionate about our brand and our purpose as he is about protecting our economic model.
I know you all agree with me that he is one of the best CFOs in the business and has played an instrumental role in growing Chipotle from under 200 restaurants to over 3,500 restaurants, investing in our premium ingredients, and supply chain, protecting our exceptional value proposition and delivering industry-leading economics and returns. As Jack always says, these three characteristics are incredibly difficult to replicate, premium ingredients, affordable prices and attractive margins.
Beyond that, he has developed an exceptional finance team, including Adam Rymer, who will become our next Chief Financial Officer. Over the last 15 years, Adam has reported directly or indirectly to and been mentored by Jack in preparation for this role. And importantly, he is just as passionate about our brand, our purpose and protecting our economic model. I'm highly confident he is the right leader to become our next CFO, and that it will be a smooth transition. So again, thank you, Jack, for your friendship, leadership and so many contributions to Chipotle.
And with that, I'll turn it over to you.
