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China Will Affect Yum! Brands’ Same-Store Sales Growth

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Yum! Brands’ same-store sales growth

In the last part of this series, we looked at Yum! Brands’ (YUM) revenue and Wall Street analysts’ expectation for the upcoming earnings release. Revenue is driven by two factors in a restaurant or café business:

  1. same-store sales
  2. unit growth

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Moderate expectations for same-store sales growth

In the above chart you can see that the analysts’ estimate the fourth quarter same-store sales growth is lower at -1%—compared to 4% year-over-year, or YoY. Sequentially, same-store sales growth is expected to improve from -2%.

To get a detailed breakdown of Yum! Brands’ same-store sales by brands, read A business overview of Yum! Brands Inc. To learn more about other restaurants’ same-store sales growth, read An in-depth overview of the US restaurant industry.

Fine-casual and fast-casual formats are taking over

Relatively newer concepts, like fast-casual and fine-casual restaurants, are replacing older fast food and casual dining restaurant concepts. Some well-known fast-casual restaurants—like Chipotle Mexican Grill (CMG) and Panera Bread (PNRA)—thrived. In contrast, Noodles & Company (NDLS) and Potbelly (PBPB) haven’t done so well.

The Consumer Discretionary Select Sector SPDR ETF (XLY) is a good way for investors to hold several restaurants—including Yum! Brands.

Recently, Shake Shack (SHAK) filed an initial public offering, or IPO. It calls itself a fine-casual restaurant chain. For a complete overview of Shake Shack’s IPO filing, read Shake Shack Filed For An IPO—What Investors Need To Know.

Yum! Brands’ same-store sales are expected to decline primarily due to China. China is one of its most important markets. In the upcoming earnings, China will be a key focus for investors and analysts alike.

In the next part of this series, we’ll discuss management’s guidance on China in more detail.

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