Starbucks (SBUX.US) declines to comment on rumors of Chipotle (CMG.US) acquisition: fully focused on transformation, potential acquisition may be costly

Zhitong Finance APP has learned that Starbucks (SBUX.US) on Thursday declined to comment on a report stating that the company attempted to acquire Chipotle Mexican Grill (CMG.US). Starbucks stated that the company is "highly focused" on its transformation under the leadership of CEO Brian Niccol.

Previously, foreign media, citing people familiar with the matter, reported that Starbucks had been working with advisors in recent months to explore a potential acquisition of Chipotle. Before Niccol was appointed CEO of Starbucks in 2024, he led Chipotle for about six years.

In response to the report, a Starbucks spokesperson stated that the company does not comment on rumors and speculation, adding that Starbucks remains focused on its two-year transformation plan under Niccol's leadership, with strong momentum and confidence in its long-term growth potential.

Starbucks, with a market capitalization of about $107 billion, trimmed losses on Thursday and closed nearly flat; Chipotle shares surged 6%, bringing the Mexican burrito chain's market cap to about $41 billion.

At Chipotle, Niccol was praised for leading the company out of its food safety crisis and expanding its digital business, driving years of strong sales growth.

"For Chipotle, we view this as positive, primarily because Brian Niccol would be returning to the brand," said RBC Capital Markets analyst Logan Reich.

However, Reich pointed out that investors have long been skeptical of restaurant companies driving growth through more brand acquisitions and said the strategic reasoning for a Starbucks-Chipotle deal remains unclear.

A potential acquisition could be costly

Analysts noted that, as Starbucks is making significant transformation investments, a deal could come at a high cost.

"The deal may require a lot of borrowing or issuing shares," said eToro Global Markets Strategist Laileh Akona. "If there is a lack of compelling financial rationale, investors may view the deal as an expensive distraction."

Over the past two years, Niccol has prioritized enhancing customer satisfaction through investment in staffing and store improvements, aiming to reduce wait times and to restore the café ambiance that helped make the chain a global brand.

As part of the comprehensive overhaul, the company has committed at least $500 million to workforce investment, which puts pressure on profitability. Under Niccol’s leadership, Starbucks has posted same-store sales growth for four consecutive quarters, although he said in July, "We still have more work to do."

"The timing seems somewhat odd because Starbucks is in the middle of a transformation and has yet to show the margin improvement investors may want to see," said Annex Wealth Management Chief Economic Strategist Brian Jacobsen.

According to LSEG data, Starbucks' adjusted operating margin in the third fiscal quarter was 14.4%, down from 16.7% two years ago.

The company also said Thursday it looks forward to announcing fourth-quarter results and providing guidance for the next fiscal year later this month.

The deal could boost Chipotle’s international expansion

Still, analysts said a deal could help accelerate Chipotle’s international expansion. "I think what makes this potential deal attractive is that CEO Brian Niccol may have the opportunity to leverage Starbucks' licensed partner relationships in Europe to expand Chipotle more aggressively," said Northcoast Research analyst Jim Sanderson.

International expansion has been a focus for Chipotle’s current CEO, Scott Boatwright, who succeeded Niccol. This year, the company opened its first restaurants in Mexico and Saudi Arabia, bringing its number of international outlets to about 100.

Last year, Chipotle also announced it was setting up a joint venture with Korean food company SPC Group to expand into the Asian market.

Starbucks has about 40,000 stores worldwide. Based on annual reports from both companies, as of last year, Chipotle operated 3,938 restaurants in the U.S., while Starbucks had about 18,000 stores in North America.