Good day and welcome to the Chipotle Mexican Grill Fourth Quarter and Full Year 2020 Results. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Ashish Kohli, Head of Investor Relations. Please, go ahead.

Hello, everyone, and welcome to our fourth quarter and fiscal year-end 2020 earnings call. By now you should have access to our earnings press release. If not, it may be found on our Investor Relations website at ir.chipotle.com. I'll begin by reminding you that certain statements and projections made in this presentation about our future business and financial results constitute forward-looking statements. These statements are based on management's current business and market expectations and our actual results could differ materially from those projected in the forward-looking statements. Please see the risk factors contained in our Annual Report on Form 10-K and in our Form 10-Qs for a discussion of risks that may cause our actual results to vary from these forward-looking statements. Our discussion today will include non-GAAP financial measures. A reconciliation to GAAP measures can be found via the link included on the Presentation page within the Investor Relations section of our website. We will start today's call with prepared remarks from Brian Niccol, Chairman and Chief Executive Officer; and Jack Hartung, Chief Financial Officer, after which we will take your questions. Our entire executive leadership team is available during the Q&A session. And with that, I'd like to turn the call over to Brian.

Thanks, Ashish, and good afternoon, everyone. We are pleased to report a strong ending to what has been a challenging year. Even today, a few Chipotle restaurants remain fully closed while only about 60% of our dining rooms are open with reduced capacity, with the rest being available for to-go services. Despite this challenging backdrop, our results demonstrate that Chipotle restaurants with the right leaders and culture along with excellent culinary, can deliver outstanding performance in any environment. Most importantly, none of this would be possible without our dedicated team members that strive to deliver a great guest experience on a daily basis. The pandemic has presented new challenges for all of us and our team has successfully navigated every one of them. I thank our team members for their ongoing commitment to serving our guests as well as supporting each other and could not be prouder of their efforts. Before we dive into our financial results, let me reflect back on 2020 and highlight a few key accomplishments that have helped propel Chipotle's mission of cultivating a better world. These include, a paramount focus on industry-leading protocols that help ensure the safety and well-being of our employees and guests, providing jobs with industry-leading benefits to nearly 88,000 people, and paying out nearly $40 million in discretionary bonuses and assistance pay to our restaurant team members, as well as over $13 million of tuition costs for employees furthering their education; prioritizing diversity, equality, and inclusion efforts across the company; and raising nearly $4 million in support of organizations helping underserved communities; and investing in the future of farming through grants, long-term contracts, and the Aluminaries Project 2.0. As a purpose-driven organization, we're already hard at work identifying ways that we can make a positive impact on the world in 2021.…

Thanks, Brian and good afternoon, everyone. Despite ongoing challenges related to COVID, we're pleased to report solid fourth quarter results with sales growing 11.6% year-over-year to $1.6 billion as comp sales grew 5.7%. Restaurant-level margin of 19.5% was 30 basis points higher than last year and earnings per share adjusted for unusual items was $3.48, representing a 21.7% year-over-year increase. The fourth quarter had a non-recurring tax benefit was partially offset by expenses related to legal reserves, restaurant asset impairments and closure costs, transformation expenses and other adjustments, which netted to positively impact our earnings per share by $3.21 leading to GAAP earnings per share of $6.69. For the full year, sales increased 7.1% to $6 billion on a comp increase of 1.8%. Restaurant-level margins were 17.4%, a decrease of 310 basis points. And we generated earnings per share adjusted for unusual expenses of $10.73, a decrease of 23.6% over last year. We had non-recurring tax benefit that was partially offset by expenses related to legal reserves, restaurant asset impairment and closure costs, as well as our transformation that positively impacted our earnings per share by $1.79 leading to GAAP earnings per share of $12.52. While the uncertainty from COVID makes it difficult to provide comp guidance for full year 2021, we remain optimistic about our future prospects as evidenced by a great start to Q1 with January comps accelerating to roughly 11%, despite a very difficult comparison. Sales in last week of January were in the high-single digits with winter weather across the country contributing to the lower comp. Assuming the pandemic doesn't worsen, we expect our Q1 comp to be in the mid- to high-teens range given an easier comparison during the second half of March. Food cost were 31% in Q4, a decrease of 210 basis points…

Thank you. And we will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Nicole Miller with Piper Sandler. Please go ahead.

Thank you, and congratulations on a great year despite all the challenges. I wanted to just talk about the go-forward estimates and opportunity around unit growth. If you remove the barriers to development that are COVID related and certainly there's no financial hurdles from a cash perspective, how fast can your current team go with a fully formed bench? Just essentially what are stretch goals that you look at internally?

Yeah. Thanks Nicole. Look, I think what we're really excited about is we definitely see the opportunity to getting back above 200 restaurants, and the good news is part of the reason why we're accelerating is because our operations are running so well, and we know we've got the people bench to run those restaurants. We'll continue to look for great sites. The good news is we have a lot of inbound desire for Chipotle coming from a lot of different places and we know we still have lots of places to build. So, we're very optimistic about how we can accelerate from where we finished this year at 161 to getting to 200 and beyond. So, Jack, I don't know if you want to add anything to that?

No Brian. I think you said it well. Our -- Nicole, our record for a year was right around 250. We certainly can get up to that point. I don't know if it will take us a couple of years or not, but I think the sites are coming to us. As Brian mentioned, we've got the deep bench now, but we're going to do it a step at a time. We're going to go from 161 to something around this 200 level, but we certainly can go beyond that.

And the cauliflower rice is outstanding. I've tried it in multiple channels. When I go into the restaurant, it's a $2 upcharge. When I order through the marketplace it's a $2.25 upcharge. Is that how you're getting the pricing power? Can you just establish for us today that you're not taking your 13% across the board right? There's a strategic I imagine algorithm that helps produce that pricing power.

Yeah. That's exactly right Nicole. We're basically testing a lot of different pricing levers, but we are very strategic in where we choose to implement that pricing, and you're right, the only place that we've taken that 13% is in the delivery channel. And effectively it plays out the way you just described it like on a cauliflower rice add-on or to your total ticket depending on what you're ordering. So -- but it's an ongoing process, it's a fluid process and we're not done working on it.

Thank you. Appreciate it.

Sure.

And our next question will come from David Palmer with Evercore ISI. Please go ahead.

Thanks. I actually had three little small questions. One, you mentioned in the release that delivery added a point or so to comp in that quarter. Does that -- was that for the entire quarter or will that be a bigger tailwind in the first quarter and beyond? I didn't catch that. Forgive me if you said that. And then Jack, just the restaurant level margins you touched on that as well about how the $19.5 million or so was short of that relationship that you would have for a $2.2 million box, i.e. that should be 22% if you get your delivery economics up to speed. Should we be thinking about -- what is the buildup that -- in that margin through the year? How fast can you close that gap in that relationship? And I guess the last thing is when it comes to the two-year trend in comp basically if you look at The Street numbers, people are thinking a mid-teens two-year or thereabout after we get vaccines. And I'm wondering how you -- I know you're not giving guidance, but how do you think about the net of people having more options but yet you're having perhaps a better daytime traffic and walk-in traffic than you would. Sorry for the three questions.

Hey, Jack, you want to take the delivery and margin and then I can touch on the last piece?

Yes. Sure thing Brian. I'll start with the margin because I might David ask you for a little clarity on the delivery comp question. But on the margin you heard it right. Right now, we're being bogged down by some of the COVID-related expenses. There's also delivery and that being a drag right now, but we can see as COVID-19 begins to be in a rearview mirror and as we have taken some action and we consider other action and how we're going to offset the margin impact of delivery, I would expect by the end of the year. And remember COVID is going to be with us for at least a quarter or two. I mean the vaccine is not going to be widely available until more like midyear. So, it's going to be more second half of the year, but I feel good about by the second half of the year that we should be closing the gap. If not all the way, we'll be knocking on the door on what the margin algorithm would be. And then David, maybe you can clarify parts about delivery comp.

Yes. And maybe I'm misunderstanding this, but I think you talked about a 13% increase -- or 13% higher prices for your delivery menu.

Right.

And you said a point -- I think it was in the release that it was about 100 [ph] basis point help to your comp in the quarter. Maybe that was because it was only there for part of the quarter because I would imagine that if delivery was about a quarter of your business I'm just trying to understand if that could be -- if delivery pricing could be a bigger lift in the coming quarters. That's basically what I'm getting at there.

Yes. So, here let me say what delivery actually did drive in the quarter. The 13% because delivery is about 25% that ends up being an effect of like 3.25% like call it 3% 3.25% price increase. That's the impact in the quarter. And the price increase we had two, we had one in August one in early October. So, we had a full effect during the quarter. So, that's more of the impact that we had during the quarter.

Got it. Okay. Thanks.

And then David just in regard to your question about our -- I think it's really our confidence in where the business goes from here is kind of what you're getting at which is look I think the thing that I'm really optimistic about is we have really grown a meaningful digital business that's got access for just about every occasion you can think of. And currently we're even testing now a car-side access. What I've seen is in the markets where we start to open those dining rooms up, you don't lose those occasions. You pick up the occasions that kind of got impacted by COVID. And it really is an and situation not an or. Now, it's not 100% back in the dining room in some of these regions. But we're seeing 50%, 60% of the dining room business come back and we're hanging on to 85%, 80% of our digital business. And as you walk into 2021, our digital system now has 19.5 million members. And what we have seen is they like the additional access, the convenience that it provides. And they like our ability to communicate with them through that rewards program. And so look I think January is a great example of the strength of Chipotle's business still being impacted by COVID rolling over a year ago that didn't have COVID. And I think it just shows the power of the new access points, the way we're running our restaurants, the culture that we have in our restaurants. And then ultimately our customers believe in the food believe in the purpose. So, very optimistic about where we get to. And as Jack pointed out, I think as the year goes on you're going to continue to see us make progress on getting that algorithm back to where we said it will get to as COVID wanes and some of these expenses go away. And the delivery channel we kind of normalize it into our business going forward.

Great. Thank you.

Yes.

And our next question will come from Chris Carril with RBC Capital Markets. Please go ahead.

Hi, thanks for taking the question. So, I think last quarter you quantified about 100 basis points of direct and indirect margin drag from COVID-related costs. Can you provide an update on how these costs impacted the margins in the 4Q? And then any thoughts on how we should think about these costs over the course of the year? That would be really helpful.

Why don't you take that one Jack?

Yes Chris. Yes they're still in that ballpark. There's direct and indirect. Like for example we had -- pay during the quarter. So, that's where our employees have been or may have been exposed. And so they don't work. We don't want them at the restaurant but we pay them anyway. That all by itself was 50 basis points. There's indirect items as well. Like for example we're selling less beverages. We're selling like a few more burritos and more steaks. That seems a little counterintuitive why would COVID drive that, but we have a lot of new customers coming in and they've been moving into those items. Unclear whether that will fully normalize after the pandemic. But I would say with the direct and indirect that we know about that comp delivery, it probably stays at 50 to 100 basis points range. And then delivery all by itself [Technical Difficulty]

Jack, we're losing you. I don't know if your microphone--

Sorry about that. Okay. I'll take it off speaker. Can you hear me a little better now?

Yeah. That's a lot better. You were kind of – you said roughly, the same and then you started to trail off.

Yeah. So it's – I would call it in that of the direct impact, it's going to be in that 50 to 100 basis point impact. And that counts things like the exclusion pay which is very direct and then product mix shifts and then does not count delivery. Delivery all by itself is going to be a pricer in this. You probably call it the 60 to 80 or 90 basis point impact. But I think the key to all of this is, we believe as COVID is starting to move into the rearview mirror as we're starting to move out of it, and combined with actions that we will take to either offset some of these costs or find other efficiencies we do think we can capture all this margin.

Okay. Great. Thanks. I’ll pass it on.

And our next question will come from David Tarantino with Baird. Please go ahead.

Hey, good afternoon. Brian, I want to come back to this question on the interplay between the delivery channel and your in-restaurant business. And I wanted to get a gauge for what you think is possible in terms of the in-restaurant transactions returning? And I think you said, you're recapturing 50% to 60%. And I think maybe 60% of your dining rooms are still closed. So I guess, what do you think the upside is on the in-restaurant business coming back? And how much of the digital channel do you think has replaced those in-restaurant transactions I guess said differently. So?

Yeah. Sure. What I would say David is, we're still seeing like that lunch occasion have a real opportunity. And what we've seen is in places where you have people moving around more for whatever their routine is, you see that occasion still happening, where they want to come into the restaurant. And look, I still think, the occasion of the dining room experience gives you something unique. It's got another level of customization, because you get to be face-to-face with how we're making your food versus the online occasion. And so when we talk to customers, there is a fair amount of people that when they have the opportunity, they will want to go back to their dining occasion. The thing that I find really promising in that is, they've also adopted new off-premise digital occasions that they're not going to abandon. And when we look at the Venn diagram, the world where it used to be they were exclusive. I only did online, and I only do in dining and there was a few that did both. That's changed. You've got a lot more people doing both. And we've got people that historically probably would not have tried it, if not for unfortunately COVID. But they still really love that in-restaurant experience and now we're top of mind for that occasion when they're not going to be in the restaurant. So we're seeing a scenario where digital is going to prove to be very sticky and people look forward to getting back out and going into our restaurants.

Great. And then, I guess, the second question is you mentioned something about with your digital marketing efforts or your loyalty program making it a priority that some of those digital customers stick. Can you just elaborate on what you're doing there?

Yeah. Sure. So this is what I mentioned. We've got 19.5 million folks in this. And the team has really done a terrific job of setting up I think the right cohorts, understanding the frequency of how they need to communicate with those cohorts, and then drive home the idea of engagement and/or driving home frequency or purchasing behaviors. And we've got various journeys taking place. I mentioned it in my prepared remarks. And what we're seeing is it does have a powerful impact on people's frequency. And the good news is we believe we're learning more every day. But what we've learned to date, I think is going to have a powerful tailwind for us going forward. And if you think about 2020, we started the year with I think it was less than 10 million in our system. So you've got twice the amount of people that we can influence behavior with on a pretty one-to-one basis. So that's why you hear me talking about why I see this being a driver going forward.

Great. Thank you.

And our next question will come from John Glass with Morgan Stanley. Please go ahead.

Hi. Thanks so much. First, just to follow up on the delivery costs. Jack, you said the 60 to 80 basis points of pressure or 69 – 90 whatever it was. Is that inclusive? Is that after you've taken this price increase, or was that prior? And is there – when you think about offsetting it is there a way to offset it fully? Are you thinking about you can recapture the margin elsewhere and delivery will always be of some dilution to margin but you just get it somewhere else, or is there a way you think within delivery specifically that you can fully offset that – those delivery cost outcomes?

Yeah, John, here let me kind of walk through the pieces. The price increase that we took it covers the dollar cost of delivery like there's an increase in delivery this year versus last year, because so many people moved into that channel. And so the price increase we took so far it gets us to about a breakeven versus last year in terms of a dollar – from a dollar standpoint. But if you go through the math, and it's easiest to do this like on an annual basis, if you – this 13% on 25% of the business ends up being about $80,000. And so look at the average cost of delivery being about $80,000 on average per restaurant. When you take that price increase, it ends up being a 3%, 3.25%, your sales will go up by about $80,000. And so you cover those dollars, your cash flow on a per restaurant basis are the same. But if you go through the math and take the same cash flow and take 25%, which ends up being $625,000 of cash flow, that's $2.5 million at a 25% margin. And if your costs go up $80,000 and your revenue goes up by $80,000, your margin is going to go down by 80 basis points. And so we don't make any less money, but the margin does end up being diluted just because of the math. Now we think there are things that we can do either levers, we can pull other efficiencies we can file. We think over time we can offset that, but that's just a math challenge that we're dealing with.

That's helpful. And then Brian maybe just bigger picture now. You've got some more Chipotlanes under your belt. You're looking at maybe it's just early days, but a digital-only restaurant. When is the time to reexamine kind of the total opportunity of units in the US? And you haven't -- we haven't spoken about international in a long, long time. I think, France was thrown into one of the comments. Is it a moment now where you start to really think about a global opportunity and start to talk and engage with either master franchisees or your own organization how you do that, or is that still too far in the future and you've got too much on your plate right now to really engage in that?

Yes. Sure. So look the first part of your question around the opportunity in the US is, we're very optimistic about Chipotlane and then the various executions we can pull off to bring Chipotle to every trade area in the United States that we think makes sense for Chipotle. And I think we've talked about that as hey, we're accelerating, we're going to get back above 200. We're within striking distance of where the max level of development we did in the past. And so the economics look great. The new restaurant openings are opening really strong. Chipotlane continues to perform. And you see us experimenting with digital only. You'll see us experimenting with Chipotlanes only. But at the end of the day, I mean, the full business of Chipotle where you got both lines, a Chipotlane as an access point with this digital system, it's just really winning economics and there are a lot of those sites available in the US. To your question about international, obviously, we believe Chipotle can travel beyond the United States. We're already seeing some success in Canada. And then, obviously, we've got some plans in place for places that we already have our foot in the door. So think of the UK, France specifically. And so you're going to see us starting to really use kind of our stage-gate process to move those markets along. And then we'll evaluate other regions accordingly. We've not made decisions on how we want to enter those other markets. And frankly, we haven't laid out exactly the order of how we're going to do it. For now, we want to deliver the US. And where we already have some presence, we're going to start leaning into to see how much more upside there is. We have an idea. And then, obviously, we're going to evaluate where we go beyond the markets that we currently are. But when we've done some research, what is clear is people love the purpose of Food with Integrity. They love the customization. They love the food. And frankly the whole value proposition, I think has legs well beyond the United States.

Okay. Thank you.

And our next question will come from Jared Garber with Goldman Sachs. Please go ahead.

Hi. Thank you very much for taking the question. It's really great to see the results this year. I wanted to ask Brian quickly on the marketing side. One of your goals when you joined the company was to boost the visibility of the brand and you talked about that at top of the call. So you'll be running the Super Bowl ad this year, which is the first for the company. Can you talk about the brand's visibility now and where it stands versus maybe several years ago when you took over? And how you're thinking about continued opportunities going forward? And I have a quick follow-up on the carne -- rather the cauliflower rice, and if you're seeing new customers joining the brand. Obviously, it's only been a couple of weeks, but if you're seeing new customers visit on the back of that? Thanks.

Yes. Sure. Thanks Jared and welcome. So look, first of all, I just believe our message is a strong message that differentiates our brand and it's a message that's very much on trend with how young people want to eat and the future of how people want to eat. So you're going to see us continue to push the visibility of Chipotle and the idea of real food, with real cooking, real culinary done frankly every day. And what I can tell you is, when I rewind the tapes, when I first got here back in 2018, we were arguably spending about the same percent of dollars and nobody saw the brand. If I would have asked you, what's Chipotle up to? You would not have been able to give me a good answer. Frankly, it would have been somebody else's narrative. And I think fast forward to where we are today. I know our brand is stronger from an awareness standpoint for what we stand for. I know the brand is stronger from a trust standpoint. I know the brand is stronger, when it comes to our menu innovation, as well as our approach to culinary. So we've made tremendous progress. The marketing team I think has done a fabulous job of keeping the brand in culture and leading culture. And you're going to continue to see us do that. I'm excited about bringing our message to the Super Bowl platform. I think it's going to be a very widely watched Super Bowl. And a lot of customers say to us, I feel good about eating at Chipotle, but they can't articulate why. We're going to tell them why they feel good about it. Obviously, they love the culinary aspect. But now they're going to get clarity on why they feel good about, why they choose the brand Chipotle. And you'll see it in the advertising around our approach to farming, animals, sustainability and frankly the communities that we support and operate in. And then your second question about cauliflower rice. Look, I love it. It's really good. I highly recommend it, if you haven't tried it. I'd recommend going 50-50, a little brown rice and cauliflower rice. But with that said, the good news is about 25% of our orders are coming from new or infrequent customers, which is really terrific. So it's off to a great start and our operators are doing a great job of making the cauliflower absolutely perfect. So we're really happy with how that's come out of the gate.

And our next question will come from Andrew Charles with Cowen. Please go ahead.

Great. Thanks. I had two questions: one on quesadilla and one on catering. So Brian you mentioned that the national launch of quesadillas are in the near feature, but it doesn't look like it's contemplated in 1Q same-store sales guidance given it implies a deceleration to your trends from January to the combined February and March time frame. Does guidance reflect uncertainty over the course of the pandemic or more so conservatism as quesadillas are expected to launch later in the quarter? And then my second question on catering. As we look towards the reopening, how big of an emphasis do you plan to place on catering given the gap you guys historically had with 1% of your sales coming from catering before the pandemic versus fast casual peers that were typically in that 8% range?

So to answer your first question look, I think there's still – as much as I'm optimistic that the vaccine program is getting better as every day goes by and it really is amazing to see the efficacy of these vaccines. There still is – we want to be cautious about where COVID goes from here. So we're being careful on that front. And then obviously, as we are able to lock and load on new initiatives, we'll share that with you guys. We're still in the phase of making sure we've got the equipment rolled out everywhere. And we're feeling really good about the training, we're going to do around quesadilla. So more to come on that front. But I would say more of it is just there's still a lot of unknown. Luckily every day seems to be better with this – with the whole COVID issue both – vaccine rates seem to be going up and COVID cases seem to be going down. And luckily less and less people are ending up in the hospital. So I'm optimistic but we wanted to be conservative on that front. And then regarding catering, yes, look Andrew, I think it's a huge opportunity. Once people want to get back together I think it's going to be a real big opportunity for our business. And it's one of the areas we're thinking about. And we're going to figure out the right time to start pushing that once obviously people can get back together in groups in a meaningful way. So it's a big opportunity. I wish we – the first step will be getting back to 1% of our sales doing catering. And then the next step will be tracking down numbers that I think are much higher than where we were with 1%.

Thanks helpful. Thanks, Brian.

Yes.

And our next question will come from John Ivankoe with JPMorgan. Please go ahead.

Hi. Thank you. As usual you kind of gave the metrics, which we could interpret. Revenue at over 6,000 stores, average volumes at least 2.5 million, at least 25% store margins. But the G&A number would be obviously a really important part to kind of having a sense of what run rate operating income might be at the company. Brian are you thinking in any way of kind of thinking about an appropriate at that level G&A per store, G&A as kind of a percentage of sales that as you think about longer-term revenue goals and longer-term operating income goals that we could perhaps start to anchor around? And I do ask that somewhat in the context of what you put in your press release and I'm sorry if I missed it in the previous press release or forgot about it, reducing non-essential – focusing on reducing non-essential controllable costs. If you could elaborate on that and kind of how much focus that I guess phrase is receiving within the organization. Thanks.

Yes. Sure. Look, I will tell you, I don't know if you've had the opportunity to meet Scott Boatwright. He's in charge of our operations. And Scott and all of our leaders in operations, their goal is to give people a great culinary experience and also give our team members a great culture and the opportunity to grow in our organization and do it in a way where we flow the revenue to the bottom line. So wherever we see an opportunity to get rid of unnecessary costs or frankly labor allocation, we go after it and we'll continue to go after it. And that's why I've got a high level of confidence – a very high level of confidence that the algorithm is going to be intact as we move throughout the year. Because as we continue to regain sales, we do things with our labor scheduling technology. And frankly our operators are laser-focused on giving people great experiences and then flowing to the bottom line accordingly. Of course, it's something we keep an eye on. So I don't think it's necessary to pick a certain point because there's always going to be opportunities where, if we see an investment that makes sense to grow our business we're going to make that investment. There's just way too much growth in this company to constrain us that way. So Jack I don't know if you've got anything else to add to that.

Brian the only thing I would add – we expect to grow sales at a faster rate than our G&A. And so we did step up. We made some investments this year that will set kind of a new baseline for us for this next year. But you can expect to see leverage in that line. In terms of where it's going to be 2, 3, 4 years from now that's -- don't have that great of a crystal ball. But if we make sure that sales grow faster than that line then three or four years from now the percentage of sales and the margin after G&A -- the operating margin is going to be better -- much better than it is today as we approach the 25% target on the restaurant level and we lever this line.

Thanks guys.

And our next question will come from Chris O'Cull with Stifel. Please go ahead.

Thanks, good afternoon guys. Jack I was curious if you could frame up where the beverage mix is today versus pre-pandemic. And then Brian looking ahead to periods where consumer behavior normalizes is there an opportunity to relaunch the Tractor Beverage program to build awareness once consumers are kind of back in the dining rooms more consistently? And then I had a follow-up.

Yes just quickly...

Go ahead Jack. Go ahead.

I was just going to say real quickly just on the mix before the pandemic our drinks were in call it the mid-30% range of transactions. And that dropped more like in the mid-20% range. So it cut out about 1/3 of our beverages. Our beverages also lean more towards bottled drinks now with the Tractor Beverage. Tractor Beverage is a -- and Brian is going to talk about it but is more in line with our food ethos. And those have a lower margin as well. So those are the two things that have been a drag on our margins.

Yes. And look we absolutely believe there's an opportunity to reintroduce Tractor Beverage once folks come back in the dining rooms. And look the good news is the feedback from those that have tried it they really liked it.

That's good. And then just assuming smoked brisket can clear the remaining operational hurdles, does the offering have the opportunity to be rolled out as a permanent offering, or are there supply constraints similar to carne asada?

Yes. No smoked brisket will be one of our -- I would call it seasonal specials. It doesn't -- it won't be a permanent item.

Okay, great. Thanks.

And our next question will come from Brian Vaccaro with Raymond James. Please go ahead.

Thanks and good evening. Just a clarification and then a question, if I could. Jack I appreciate the monthly comp commentary. I was hoping maybe we could convert that into absolute sales volumes. And it seems that average weekly sales have stepped up more recently maybe into that 47-a-week range. Is that correct? And then does your Q1 comp guide in the mid- to high-teens does that assume any change in that absolute sales volume later through the quarter?

Yes. We don't really look at it internally that way on a weekly volume, but the volumes definitely stepped up. And if you looked at the weekly volumes, we all saw that COVID really came on pretty strong in December. We did see our sales bounce around. So even though our monthly comps were pretty even we softened at the end of November. Right before Christmas we started to pick up a little bit. We surged after Christmas and then surged again in January. So we're definitely at a higher level right now. And in terms of the guidance Brian mentioned before the first quarter is still difficult to predict. We don't know where COVID is going next. We're optimistic because the vaccines are getting traction. But it essentially takes the last week trend which we talked about in the script. We -- while we did overall 11% for January we had moved down into the high single digits at the last week of January. If you take that trend and move that out over the rest of the quarter that's what we use to calculate that guidance of mid- to high-teens.

Okay. Great. That's helpful. And then my question is on the loyalty program. And I understand you're up to nearly 20 million members. But could you comment on how engagement with the program has been trending? Maybe you could give us a sense of how many active users you have and maybe how you define that or perhaps a comment on the percent of sales that are generated within the loyalty program in recent months.

Yes sure. So I would say the way we look at it is, it's roughly about 60% are active. And those are the folks that obviously we've got an ongoing program with. We also have programs though with folks that we see that aren't active right to get them to reengage. So we're accessing the full database as well as other platforms on top of it. So it goes well beyond that 20 million. But like I mentioned earlier we're seeing really good results in our ability to interact with those that are active and then we're able to also get people to be reactive -- or reactivated I guess is the way to think about it. So it's one of those things that we're very excited about because we continue to learn. And so when we see somebody that is no longer active we learn from it and then we figure out how to reengage them. And then we're having some success in keeping a percentage of those people then becoming active as we continue to grow the total universe. So -- and the good news is we're also modifying the program as we go forward. We're going to continue to keep people excited. And we get feedback on how we can make it better and we'll continue to do that.

All right. Thank you.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Brian for any closing remarks.

Yes. Thank you and thanks everybody for taking the time and asking the questions. I'm just going to reiterate what I really said at the beginning of the call which is really proud of our team members the work that's happened in our restaurants and our support centers through a very challenging year. I think it just demonstrates our purpose, our values, our culture and the caliber of the people that we have at Chipotle. It really demonstrates the resiliency of the brand and the leaders that we have. And very proud of where we are. And obviously I'm very optimistic about where we're going. The digital system is strong it's growing and we have plans to continue to grow it. Our in-store business when it can come back I know people will want to come back because the culinary and the food is second to none. And you just put those two things together with the ability to continue to build more restaurants hire more people and grow our people accordingly I think the future is very bright. And I'm optimistic that COVID is hopefully more in the rearview mirror going forward. So thank you for taking the time. Hopefully all of you are safe and your families have weathered 2020 well. And I look forward to continuing to share the story in 2021. All the best.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.