The food safety scandal troubling the fast-casual restaurant chain Chipotle could result in a sales benefit for Whole Foods Market, an analyst said in a report Wednesday.
According to Bil Kirk, who covers food retail stocks for RBC Capital Markets, the foodborne illness issues striking Chipotle since October represents an estimated $933 million in lost sales. With 85% of its 415 stores in close proximity to Chipotle locations, Whole Foods could absorb about 3%, or $31 million, of that total, according to Kirk's analysis. That would result in a 0.2% benefit in annual sales for Whole Foods, and 0.3% in its current second quarter.
The opportunity would be a bit of good news for Whole Foods, which has seen comparable store sales decreasing in recent quarters, Kirk noted. Analysts are expecting second-quarter comps at the Austin, Texas-based retailer to decrease overall by about 1.9%.
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Kirk's findings noted that 50% of Whole Foods' stores have a Chipotle store within 1 mile, and those stores could capture up to 25% of the restaurant's lost sales. Stores within one to three miles away could see 10% of the lost sales; and stores three to five miles away could capture 3% of the lost sales, he added.
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