Chipotle Loses CEO to Starbucks
There was a big shake up today in which it was announced that Chipotle’s CEO Brian Niccol would be leaving to take on the role of CEO at Starbucks. CMG 0.00%↑ had a great run during Niccol’s tenure, since 2018 the stock is up over 700%. On the news today, SBUX 0.00%↑ was up 21% and Chipotle was down as much as 12%. I took the opportunity to buy more Chipotle shares at around $49 and am already up 7%.
Niccol is a great CEO that could turn Starbucks around as the company has been struggling and posted 2 lackluster quarters so far this year. Last quarter their revenue was down 14% in China as they struggle against domestic companies like Luckin Coffee who’s average coffee prices are half that of Starbucks. If Starbucks wasn’t already up 21% on the news I would’ve considered buying back in.
This comes after Chipotle’s CFO also just announced he was leaving the company on their Q2 earnings call, to retire after a 15 year run.
Chipotle posted great results for Q2 but did guide for some short term headwinds over the next couple quarters. Here are some of the highlights year over year:
Comparable restaurant sales increased 11.1% driven by 8% transaction growth
Revenue increased 18.2% to $3 billion
Restaurant level operating margin was 28.9%, up from 27.5% in Q2 of 2023
They opened 52 new restaurants, 46 of which have a Chipotlane. As far as guidance they think margins will come under pressure.
Long term I still believe the company will do great, but Chipotle has now lost both its CEO and CFO in rapid succession so we’ll have to see about short term. It could be they decided to get out on top before margins take a hit.
Niccol has his work cut out for him at Starbucks, but perhaps felt like he got Chipotle to a great place and wanted a new challenge. He definitely knows how to turn around a business.
Even with the shake up I’d much rather own Chipotle today than Starbucks. There is a lot of risk with Starbucks and it seems to be facing much bigger problems, whereas Chipotle’s future growth is all but certain. They continue to add new restaurants and will double the company’s revenue on expansion alone over the long term. They have industry leading margins and are just beginning international expansion. They capitalize on all the right trends which I’ve discussed extensively in previous articles that I will link below.
Starbucks on the other hand has a serious problem in China, a market they bet the company’s future growth on. They don’t have the same tailwinds as Chipotle, in fact they are facing major headwinds.
Over the next couple quarters I do think Chipotle’s margins have peaked as management sort of alluded to on their earnings call. So even though I added a little CMG 0.00%↑ on the dip, I’m not going in heavy here as I think there are currently better opportunities.
Until next time!
