Starbucks (SBUX.US) declined to comment on the Chipotle (CMG.US) acquisition rumor: it is fully focusing on transformation, potential acquisitions or high costs

The Zhitong Finance App learned that Starbucks (SBUX.US) declined to comment on a report on Thursday that said Starbucks had tried to acquire Chipotle Mexican Grill (CMG.US). Starbucks said the company is “highly focused” on transformation under CEO Brian Niccol (Brian Niccol).

Foreign media previously quoted people familiar with the matter as reporting that Starbucks has cooperated with consultants in recent months to study the potential acquisition of Chipotle. Nicole was in charge of Chipotle for about six years before becoming Starbucks CEO in 2024.

In response to the report, a Starbucks spokesperson said that the company did not comment on rumors and speculations, adding that Starbucks is still focusing on the two-year transformation plan under Nicole's leadership and has strong momentum and confidence in long-term growth potential.

Starbucks, which has a market capitalization of about 107 billion US dollars, narrowed its decline on Thursday and closed basically flat; Chipotle's stock price surged 6%, bringing the burrito chain's market value to about 41 billion US dollars.

At Chipotle, Nicole was praised for leading the company through the post-food safety crisis and expanding its digital business, driving the company to achieve years of strong sales growth.

“For Chipotle, we think this will be seen as a benefit. The main driver is Brian Nichol's return to the brand,” said RBC Capital Markets analyst Logan Reich.

However, Reich pointed out that investors have always been skeptical about catering companies driving growth by acquiring more brands, and said that the strategic logic behind Starbucks' acquisition of Chipotle is still unclear.

Potential acquisitions can be costly

Analysts said that as Starbucks is investing heavily in the transformation, the acquisition could be costly.

“The deal may require significant borrowing or stock issuance,” said Lalai Arcona, a global market strategist at eToro. “In the absence of compelling financial reasons, investors may view the deal as a costly distraction.”

Over the past two years, Nicole has prioritized customer satisfaction by investing in staffing and store improvements, with the aim of shortening waiting times and restoring the café atmosphere that helped the chain become a global brand.

As part of a comprehensive overhaul, the company has committed at least $500 million to invest in labor, putting pressure on its profitability. Under Nicole's leadership, Starbucks has achieved four consecutive quarters of same-store sales growth, although he said in July that “we still have more work to do.”

“This timing is a bit odd because Starbucks is in the middle of a transformation and has yet to show the profit margin improvements investors might want to see,” said Brian Jacobson, chief economic strategist at Annex Wealth Management.

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

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

Deal could boost Chipotle's international expansion

However, analysts said the deal could help accelerate Chipotle's international expansion. “I think the merit of this potential deal is that CEO Brian Nichol has the opportunity to expand Chipotle more aggressively using Starbucks' authorized partnerships in Europe,” said Northcoast Research analyst Jim Sanderson.

International expansion has always been the focus of Chipotle CEO Scott Botwright, who succeeded Nicole. The company opened its first restaurants in Mexico and Saudi Arabia this year, bringing the number of stores outside the US to around 100.

Chipotle also announced a joint venture with Korean food company SPC Group last year to expand the Asian market.

Starbucks has around 40,000 stores around the world. According to the two companies' annual reports, as of last year, Chipotle had 3,938 restaurants in the US, while Starbucks had about 18,000 stores in North America.