Same-store sales growth
The Wendy’s Company (WEN) operates restaurants all around the globe. However, its North American segment, or the United States and Canada, is its main source of operations.
Same-store sales, which measure the percentage change in revenues generated by existing restaurant locations over the similar period a year ago, is a key valuation metric to consider when investing in a restaurant stock.
Wendy’s system same-store sales growth was 1.3% in the fourth quarter of 2014 compared to 3.10% in the corresponding quarter a year ago in 2013. System same-store sales include company-operated as well as franchise restaurants.
During the previous quarter, same-store sales in North America for company-operated restaurants were higher compared to franchise same-store sales. The company credited the difference between company-operated and franchise same-store sales to the company’s Image Activation Program. The above chart demonstrates the change in same-store sales growth for eight quarters.
The ongoing Image Activation Program positively impacted same-store sales growth of franchise restaurants in the previous quarter. It’s expected to continue benefiting Wendy’s. McDonald’s (MCD) is also actively pursuing a restaurant reimaging modeling strategy to improve its comparable sales.
Yum! Brands (YUM), one of Wendy’s competitors, reported a same-store sales growth of 6% for the KFC (Kentucky Fried Chicken) division in the United States.
An investor can get exposure to the restaurant industry through ETFs such as the Consumer Discretionary Select Sector SPDR Fund (XLY), which holds 37% of retail portfolio including restaurants such as Starbucks (SBUX), MCD, and YUM.