Analysts link 2Q Chipotle sales slowdown to Taco Bell success
A slowing of sales at Chipotle Mexican Grill in the second quarter sparked debate among Wall Street analysts and observers that Taco Bell’s new Doritos Locos Tacos may be to blame.
Taco Bell introduced the new taco line, which feature shells made with nacho cheese-flavored Doritos, in March, and the product has been hailed as one of the company’s most successful. Last week, parent company Yum! Brands Inc. attributed a 13-percent increase in Taco Bell’s same-store sales during its second quarter to the launch of Doritos Locos Tacos.
Meanwhile, Chipotle last week reported a less-than-expected same-store sales increase of 8 percent during its second quarter — a slip after seven consecutive quarters of double-digit same-store sales.
Though Chipotle’s results overall were enviable, including a 61-percent increase in profit and a 21-percent gain in revenue, the chain’s typically high-sailing stock price took a plunge, losing nearly a quarter of its value on Friday.
In a call with analysts last week, Chipotle blamed the sluggish economy and difficult two-year comparisons. In reports, however, Wall Street analysts pointed to a possible correlation between Taco Bell’s same-store sales rise and Chipotle’s relative fall.
“We believe Taco Bell’s resurgence — at four times the number of units and three times the amount of system U.S. sales — may have had some impact on Chipotle,” wrote John Ivankoe of J.P. Morgan, who attributed Taco Bell’s lift to the “decidedly un-Chipotle-like” Doritos Locos Tacos.
Ivankoe warned that Taco Bell’s new Cantina Bell menu, which launched July 5, at the beginning of Chipotle’s third quarter, was a more “direct competitive move.”
The Cantina Bell menu was designed by celebrity chef Lorena Garcia and includes a line of bowl or burrito options with new ingredients for Taco Bell that evoke the style of Chipotle — though they are more similar to what might be found on the menu at other fast-casual competitors, such as Baja Fresh Mexican Grill or Qdoba Mexican Grill.
Taco Bell’s’ Cantina Bell offerings, however, are positioned at under $5 — a premium offering for the quick-service Taco Bell, but a value position compared with Chipotle and others.