Chipotle Mexican Grill Inc.’s loss might be Whole Foods Market Inc.’s gain.
RBC Capital Markets estimates that Chipotle’s food safety concerns represent a US$933-million revenue opportunity for competitors, with Whole-foods potentially being one of the biggest beneficiaries since half its locations are within a mile of the Chipotle, and nearly 85 percent are within three miles of a Chipotle.
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Analyst William Kirk believes Whole-foods can capture 25 % of the nearest Chipotle’s lost sales when inside a mile, minimizing percentages when locations are further away.
All in, he estimates Whole-foods could take approximately three per cent of Chiptole’s sales, resulting in 20 basis points of growth this year and 30 bps next quarter.
“The set-up for Whole-foods is favorable for the following quarter, as the sentiment is low enough for the sales gained from Chipotle to create some upside,” Kirk told clients.
