Retail

Chipotle Going Asian (CMG, PFCB, MCD)

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 Average American Is Losing Momentum On Their Savings Every Day (Sponsor)

If you’re like many Americans and keep your money ‘safe’ in a checking or savings account, think again. The average yield on a savings account is a paltry .4%1 today. Checking accounts are even worse.

But there is good news. To win qualified customers, some accounts are paying more than 7x the national average. That’s an incredible way to keep your money safe and earn more at the same time. Our top pick for high yield savings accounts includes other benefits as well. You can earn a $200 bonus and up to 7X the national average with qualifying deposits. Terms apply. Member, FDIC.

Click here to see how much more you could be earning on your savings today. It takes just a few minutes to open an account to make your money work for you.

1 https://www.fdic.gov/national-rates-and-rate-caps

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.

AI Portfolio

Discover Our Top AI Stocks

Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.

You can follow him investing $500,000 of his own money on our top AI stocks for free.