Oct 8 (Reuters) - Starbucks on Thursday declined to comment on a report that it had explored a takeover of Chipotle Mexican Grill, saying it was "laser focused" on its turnaround under CEO Brian Niccol.
The Financial Times reported earlier that Starbucks had worked with advisers in recent months on a potential takeover of Chipotle, citing people familiar with the matter. Niccol ran Chipotle for about six years before taking the top job at Starbucks in 2024.
Responding to the report, a Starbucks spokesperson
said the company remained focused on its two-year turnaround under Niccol and had strong momentum and confidence in its long-term growth potential.
Chipotle did not respond to a Reuters request for comment.
Starbucks, valued at about $107 billion, pared losses to close nearly flat on Thursday, while Chipotle shares jumped 6%, giving the burrito chain a market value of about $41 billion.
At Chipotle, Niccol was credited with steering the company through the aftermath of its food-safety crises and expanding its digital business, helping drive years of strong sales growth.
"For Chipotle, we think this would be viewed positively, primarily driven by Brian Niccol returning to the brand," RBC Capital Markets analyst Logan Reich said.
Still, Reich said investors have been sceptical of restaurant companies buying additional brands to drive growth, adding that the strategic rationale for Starbucks acquiring Chipotle was unclear.
A takeover could also prove costly for Starbucks as it invests heavily in its turnaround, analysts said.
"A deal could require heavy borrowing or issuing shares," said Lale Akoner, global market strategist at eToro. "Without a compelling financial case, investors may view the deal as an expensive distraction."
Over the past two years, Niccol has prioritized customer satisfaction through investments in staffing and store improvements aimed at reducing wait times and restoring the coffeehouse atmosphere that helped make the chain a global brand.
The company has committed at least $500 million to labour investments as part of its overhaul, putting pressure on profitability. Starbucks has posted four consecutive quarters of comparable sales growth under Niccol, though he said in July that "we have more work to do."
Adjusted operating margin was 14.4% in the fiscal third quarter, down from 16.7% two years earlier, according to LSEG data.
"The timing of this would be a little weird, given that Starbucks is in the middle of its transformation and hasn't yet shown the margin improvement investors are probably hoping for," said Brian Jacobsen, chief economic strategist at Annex Wealth Management.
A deal could, however, help accelerate Chipotle's international expansion, analysts said.
"What I like about this potential is the opportunity CEO Brian Niccol would have to leverage Starbucks' licensed partnerships in Europe to expand Chipotle more aggressively," Northcoast Research analyst Jim Sanderson said.
International expansion has been a focus for Chipotle CEO Scott Boatwright, who succeeded Niccol. The company opened its first restaurants in Mexico and Saudi Arabia this year, adding to roughly 100 locations outside the United States.
Chipotle also announced a joint venture last year with South Korean food company SPC Group to expand in Asia.
Starbucks has roughly 40,000 stores worldwide. In the United States, Chipotle had 3,938 restaurants as of last year, while Starbucks has about 18,000 stores in North America, according to the companies' annual reports.
(Reporting by Neil J Kanatt and Juveria Tabassum in Bengaluru; Writing by Aishwarya Venugopal; Editing by Arun Koyyur, Nick Zieminski, David Gaffen and Anil D'Silva)
