Starbucks (SBUX) is clarifying acquisition rumors to the outside world and focusing on repairing its own operations, while at the same time implementing store rule adjustments and increasing local investment in the Chinese market.
In early October, market reports emerged that Starbucks was in talks to acquire Chipotle Mexican Grill (CMG), and the news drove Chipotle’s stock price higher while putting pressure on Starbucks’ stock price. On October 12, a Starbucks spokesperson formally denied the acquisition plan, and the acquisition rumor quickly cooled down. The connection behind the rumor came from management backgrounds: Starbucks’ current chief executive officer Brian Niccol previously led Chipotle, but coffee and Mexican fast casual food differ markedly in operating hours, staffing models, and supply chains. Starbucks itself is in a transformation stage and needs to prioritize solving its traffic challenges, and many shareholders also have concerns about large acquisition transactions. After the rumor dissipated, Chipotle’s stock price returned to weakness, with the stock down about 30% over the past year and hovering near its 52-week low.
After new chief executive officer Scott Boatwright introduced a growth plan, Chipotle has achieved comparable sales growth for two consecutive quarters. The brand launched high-protein new products and increased the number of limited-time offerings in an attempt to improve value for money, but restaurant operating margins declined during the same period, with labor and performance bonuses pushing up operating costs. The market is concerned that the recovery in customer traffic comes from pricing concessions rather than sustainable profit repair. Currently, Chipotle’s forward price-to-earnings ratio has fallen to the 28 to 29 times range, and the market has already digested a considerable amount of negative expectations. The market will focus on the third-quarter report to be disclosed on October 28, and margin performance is the core indicator for judging the quality of the transformation.
Starbucks China announced that starting October 22, stores nationwide will implement a policy requiring customers to make a purchase before they can sit down, and stores will post notices to inform customers. The brand plans to continue increasing investment in fiscal year 2027, adding staffing during peak periods, upgrading system equipment, and renovating about 1,000 stores. This adjustment echoes Starbucks’ previous policy changes in the U.S. market and is also its move to respond to intense coffee competition within China. Starbucks China’s same-store sales had been declining for the previous two years, and the company has sold a majority stake in its China business to Boyu Capital, bringing in a local partner. Local brands such as Luckin continue to squeeze market space, consumers are no longer willing to pay a premium for overseas brands, and Starbucks’ original large-store model continues to come under pressure.
