Queso Performance For Chipotle Said To Be 'Underwhelming'

Loading...
Loading...
Investors hoping
Chipotle Mexican Grill, Inc.CMG
would see a notable boostfrom its new
queso offering may want to reconsider their thesis, at least according to analysts at BMO Capital Markets. The firm's Andrew Strelzik maintains a Market Perform rating on
Chipotle's stock
with a price target lowered from $330 from $350 due to "underwhelming" demand for the new product.

Strelzik conducted informal surveys of Chipotle customers at more than 20 different
restaurant locations
across New York City to evaluate order frequency of the new menu offering. The results were "underwhelming" and may suggest that a potential comp lift from queso of 250–300 basis points won't become reality.

The survey found that only 15 percent of all orders included queso, less than half of the approximate 40 percent of orders that include guacamole. In addition, two-thirds of the orders included queso as an entree add-on, which represents a negative mix shift compared to guacamole.

Regardless, after the initial trial period, queso contributions will begin to moderate as is the case in any new product launch, the analyst added.

Loading...
Loading...

Bottom line, investors should consider lowering their expectations on Chipotle's ability to be successful in product innovations as a tool to drive sales. To date, the company yet to "establish a track record of developing and implementing successful new products."

Related Links:'Grainy' Or Not, Queso Might Be The Distraction Chipotle NeedsCowen Cuts Chipotle To Sell, Consumer Perception Still Low
______
Image Credit: By http://www.flickr.com/photos/tacvbo/ [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons
Loading...
Loading...
date
ticker
name
Price Target
Upside/Downside
Recommendation
Firm
Posted In: Analyst ColorPrice TargetReiterationRestaurantsAnalyst RatingsGeneralAndrew StrelzikBMO Capital MarketsChipotleQuesorestaurants
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!

Loading...