Chipotle Mexican Grill Inc. (NYSE: CMG) opens its first Asian-themed store today, called ShopHouse Southeast Asian Kitchen, in a move calculated to take advantage of consumer demand for limited-service Asian food. Sales of Asian food grew at nearly a 6% rate in 2010, and are expected to grow by another 5% this year, making the Asian restaurants the fastest growing segment of the limited-service market.
While not a crowded field, there is certainly competition. P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB) owns and operates 168 Pei Wei stores in the same space and another 200 or so of its namesake stores. Privately-held Panda Restaurant Group, Inc. operates more than 1,300 mall-based Panda Express stores and Carlson Restaurants Worldwide, Inc., another privately-held firm, operates more than 90 Pick Up Stix stores in the US southwest.
Chipotle shares have gained more than 80% in the past 12 months, while P.F. Chang’s shares have fallen by around -40%. The pricier Chang’s has stalled as customers have voted with their feet, staying away from higher priced casual dining in favor of lower cost stores like Chipotle.
But even low-priced stores are having their troubles. McDonald’s Corp. (NYSE: MCD), which had been growing nicely for several quarters, had a downturn in its August sales. That is not a positive signal for a new lower-priced option like Chipotle’s new ShopHouse brand, and Chipotle originally came from McDonald’s.
And brand is another problem. Building a solid new brand is not easy or cheap in the best economic times — and the US economy is not anywhere near its best right now. Chipotle also faces the problem of essentially being unable to leverage its solid position in Mexican food eateries in a completely different style of cooking. The situation resembles what you might think if your favorite local Mexican restaurant suddenly began serving Thai food. The usual reaction is to ask what the heck the store knows about making Thai food. To avoid that reaction costs a lot and if Chipotle puts enough money behind the ShopHouse stores, the company might come up with a winner.
Chipotle’s revenue grew 22% in its most recent quarter. If the company can keep that up, there’s no reason to think that the ShopHouse stores won’t be successful. But that’s a pretty big ‘if’ as the economic data keeps slowing.
Shares in Chipotle are up about 0.5% today, at $317.40, in a 52-week range of $164.26-$337.32. P.F. Chang’s shares are up more than 1%, at $29.16, in a 52-week range of $27.50-$53.39.
Paul Ausick
The #1 Thing to Do Before You Claim Social Security (Sponsor)
Choosing the right (or wrong) time to claim Social Security can dramatically change your retirement. So, before making one of the biggest decisions of your financial life, it’s a smart idea to get an extra set of eyes on your complete financial situation.
A financial advisor can help you decide the right Social Security option for you and your family. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you.
Click here to match with up to 3 financial pros who would be excited to help you optimize your Social Security outcomes.
Have questions about retirement or personal finance? Email us at [email protected]!
By emailing your questions to 24/7 Wall St., you agree to have them published anonymously on a673b.bigscoots-temp.com.
By submitting your story, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.