Starbucks reportedly explored Chipotle takeover, declines comment and says focused on turnaround
SBUX•Starbucks declined to comment on a report that it had reportedly explored a takeover of Chipotle, saying it remains focused on CEO Brian Niccol’s turnaround. Chipotle shares rose 6%, while Starbucks closed nearly flat.
1. Companies respond to report
Starbucks said it does not comment on rumors and speculation and remains focused on its two-year turnaround under Niccol. Chipotle did not respond to a request for comment. Starbucks was valued at about $107 billion, while Chipotle’s market value was about $41 billion.
2. Turnaround costs and results
Starbucks has committed at least $500 million to labor investments as part of its overhaul and posted four consecutive quarters of comparable sales growth under Niccol. Its adjusted operating margin was 14.4% in the fiscal third quarter, down from 16.7% two years earlier. The company said it would report fourth-quarter results and provide its outlook for the next fiscal year later this month.
3. Potential expansion opportunity
Analysts said a deal could help accelerate Chipotle’s international expansion, but also said the strategic rationale was unclear and a takeover could prove costly for Starbucks. Chipotle opened its first restaurants in Mexico and Saudi Arabia this year and has roughly 100 locations outside the United States.
