Starbucks and Chipotle report mixed earnings
Weeks after Starbucks denied exploring a Chipotle takeover, the coffee chain beat forecasts while Chipotle's profit fell despite stronger sales.
Starbucks and Chipotle reported earnings this week, three weeks after Starbucks denied it was preparing a takeover bid for the burrito chain, and the numbers gave each side of that story a different headline.
Starbucks posted fiscal fourth-quarter results on 29 October that beat forecasts. Global comparable sales rose 7.2%, with US comps up 7.7%, and non-GAAP earnings per share climbed 54% to $0.80. Reported revenue fell 4% to $9.1bn, a drop the company attributes to the licensing of its China business rather than to weaker demand.
The quarter included the closure of 250 coffeehouses under the "Back to Starbucks" restructuring plan that chief executive Brian Niccol has pushed since taking over. For the full year, revenue rose 2% to $37.91bn and diluted earnings per share improved to $2.21 from $1.63. Starbucks guided to 2027 earnings per share of $3.15 to $3.25 and said it would resume share buybacks next year.
We want to be clear: we are not buying Chipotle.
Chipotle's numbers tell a mixed story
Chipotle's third-quarter results, reported a day earlier, moved in the other direction on profit even as sales grew. Revenue rose 9.6% to $3.3bn and comparable sales were up 2.1%, but net income fell to $339.9m, or $0.27 a share, from $382.1m a year earlier, missing analyst estimates of $0.29. The shares still rose almost 7% after the release.
Chipotle said comparable sales had faced low-single-digit headwinds from July linked to food-safety concerns and wider geopolitical developments, before recovering to earlier trends by late August. Management kept its full-year guidance of low-single-digit comparable sales growth and 350 to 370 new restaurant openings, and projected roughly 2% comparable growth for the current quarter.
What the denied deal left behind
The Financial Times reported on 8 October that Starbucks had explored a takeover of Chipotle and hired advisers on a possible bid. Starbucks denied it on 12 October, saying simply it was "not buying Chipotle," a statement that followed its own earlier quarter of sales growth tempered by the China exit. The idea drew attention largely because Niccol ran Chipotle until late 2024, before Starbucks hired him to lead its own turnaround.
Neither company's results settle whether a deal would have made sense. Starbucks' comps are recovering faster than Chipotle's margins, which gives each side a different case for staying independent, at least for now.
