Chipotle Keeps Delivering
A notable exception to the hard hit restaurant industry was Newport Beach-based Chipotle Mexican Grill Inc. (NYSE: CMG).
Analysts estimated its 2020 revenue climbed 7% to $6 billion, and then will rise another 17% to $7 billion this year.
Its market cap has jumped $14 billion the past year to $39.4 billion, making it the county’s second most valued company behind Edwards Lifesciences Corp.
CFO Jack Hartung attributed the success to investing in technology years before the pandemic began.
For example, besides its normal line of food preparers, it has a second line dedicated to online ordering. A customer can order everything online, schedule a time to pick up the food or have delivery service by Uber Eats, DoorDash or others.
“It made the experience super easy for the customer who doesn’t need to talk to anyone,” Hartung said.
“A lot of companies are playing catch-up.”
The company also experimented with “Chipotlanes” where customers can drive through to pick up their food. Hartung said some landowners were reluctant to have “stacked cars” in their parking lots. The system has proved to be so efficient that cars rarely wait, Hartung said.
“At a typical drive-thru, you may have to wait five minutes or more. Our typical wait time is under a minute. It’s a huge advantage over a typical drive-thru. It is the digital drive-thru of the future.”
Hartung is optimistic that the vaccine will make things better this year. The company is planning to accelerate its growth to open 200 restaurants this year, up from 150.
“What makes me most proud is how our company has navigated through this pandemic. We’ve stay trued to what makes Chipotle a special brand. That makes me feel good about the past year and about the future.
“We can see the light at the end of the tunnel.”
Allied Grows its Universe
Santa Ana-based Allied Universal, the nation’s largest private security firm, was on the front lines of the pandemic and the subsequent riots.
Its guards screened incoming patients at hospitals in hard-hit places like New York City and New Orleans. The company at the beginning of the pandemic “got gouged” when it had to buy 60,000 masks at $10 each. When riots struck major cities, Allied Universal used its technology to warn retail customers of protests coming their way and helped evacuate some buildings.
“2020 was a very challenging year for our business, employees and clients,” said CFO Drew Vollero. “However, the organization persevered through these turbulent times.”
“The company is fortunate to have a resilient business model that can be recession resistant,” he said. “Over each of the last eight quarters, both sales and profits have grown by double digits, while margins have grown in every quarter as well. The company is now annualizing at nearly $9.5 billion in revenue.”
The pandemic may turn out to not even be the company’s biggest event of the year.
Allied restarted its acquisition machine in a big way in December when it offered $5.1 billion to buy London-based G4S PLC, which was involved in a bidding war on the London Stock Exchange. When the deal is completed, perhaps as soon as this quarter, it will create the world’s seventh-largest employer with 750,000 employees and have about $18 billion in annual sales.
Vollero expects 2021 to be a challenging year and travel will begin to pick up in the second half. Vollero, who has lived in Orange County for 30 years, has no plans to move.
“Laguna Niguel is truly the best place to live,” he said.
UCI’s Quick Pivot
Ron Cortez, CFO at the University of California, Irvine, saw firsthand the pandemic effects when campus housing, which is typically 97% occupied, plunged to 40% and the university was forced to limit each room to one student.
“One of the most memorable moments was how fast it came upon us and how fast we had to organize students into leaving the campus,” he said. “That was a big logistics project. I was so impressed by everyone’s commitment to safety.”
Besides losses in revenue from student housing, the university received $40 million less than expected from the state government.
“The campus has been preparing for number of years for economic recession. We never expected a pandemic but because of that planning, we’re actually in good shape.”
UCI went to remote teaching, which “seemed to go smoothly.” He was surprised by the effectiveness of the remote working environment.
“I wasn’t a big user of Zoom or online communications,” he said. “I’ve been impressed with how effective it’s been. It will change things about how we look at the future, how much space we’ll need. I went from not being a big fan to a big fan.”
Revolve’s Revival
Revolve Group Inc. CFO Jesse Timmermans watched revenue climb 20% last January and February. Then the bottom fell out in March for the Cerritos-based maker of fashionable clothing (NYSE RVLV).
“It literally went down 50% overnight,” Timmermans said.
Its second and third quarters are its high seasons, when customers buy clothes to wear to events like the Coachella Festival.
“COVID hit right when the pump was primed,” he said. Its typical female customer “definitely wasn’t buying dresses and going out.”
His merchandise and planning teams had to switch from dresses, which make up about a third of sales, to loungewear and activewear.
“The team was able to pivot really quickly,” he said. “The team grew closer. Whenever you’re working through a challenging time, it can bring out the worst. But it brought out the best.”
The company, which counts some 45,000 apparel, footwear, accessories and beauty styles, expanded its playbook by marketing “self-care” products such as cosmetics, shampoos and oils.
Amazingly, while the top line took a hit, the company reported record second and third quarters. Timmermans attributed the record profits to improved inventory turns, reduced marketing and a return rate that dropped significantly from 50% to 60% to around 40%.
Its stock has risen fivefold to $34.74 and a $2.4 billion market cap since a 52-week low around $7.17 in March.
Analysts are expecting sales to decline 4.2% to $576 million in 2020 and then resume growth again this year by 18% to $680 million.
He said the pandemic has increased his team’s productivity such as reducing their traveling time by one to two days when they had to physically meet investors and analysts.
“We’re optimistic and confident that the world will get back to normal at some point in 2021. We want to be out there in a big way.”
Summit’s View of Crisis
Summit Healthcare REIT Inc. CFO Elizabeth Pagliarini is in the middle of the pandemic, owning 57 senior housing facilities in 14 states.
“We’ve been very heavily hit,” she said. “This year has been like no other. Our industry is used to a flu season every year. But never anything like this. It’s been tragic. We have spent the entire year focusing on what we can do to help.”
The Lake Forest-based company is a landlord, so it normally doesn’t get involved in the operations of its facilities. However, over the past year, it’s helped tenants apply for federal assistant such as Medicaid funds and Paycheck Protection Program loans, as well as getting personal protective equipment.
“We’ve taken a more aggressive stance,” she said.
“We’ve been trying to help our operators deal with this horrible pandemic. It’s been brutal. Luckily, our portfolio has fared really well. We’re still collecting our rent. We haven’t had any major issues because of this.”
Its residents are starting to receive vaccines. One of its facilities in Oregon was converted to handle only those with the coronavirus. None of its facilities have been mandated to accept patients with the coronavirus, which happened in New York earlier last year.
Last year, Summit put acquisitions on hold.
“We’re definitely back in acquisition mode this year,” she said. “We expect 2021 to be much better.”
