WHOLE FOODS SET TO CAPITALIZE ON CHIPOTLE LOSSES

Chipotle Mexican Grill Inc.’s loss may 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 a Chipotle, and nearly 85 per cent are within three miles of a Chipotle.

Analyst William Kirk believes Whole Foods can capture 25 per cent of the nearest Chipotle’s lost sales when within a mile, and lower 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 favourable for the next quarter, as the sentiment is low enough for the sales gained from Chipotle to generate some upside,” Kirk told clients.