Same-store sales growth
In the previous part of this series, we looked at Yum! Brands’s (YUM) earning per share (or EPS) and Wall Street analysts’ expectations for the upcoming earnings release on April 21. Revenues are driven by two factors in the restaurant business—same-store sales growth and unit growth.
Moderate expectations for same-store sales growth
In the above chart, you can see that Yum! Brands reported 1Q14 same-store sales growth of 3%, compared with 4% year-over-year. Sequentially, its same-store sales growth has improved from -2%. Based on this trend, Yum! Brands is expected to report a moderate same-store sales growth.
To get a detailed breakdown on YUM’s same-store sales by brands, please read A business overview of Yum! Brands Inc. To learn more about same-store sales growth of other restaurants, refer to An in-depth overview of the US restaurant industry.
Peers’ same-store sales growth
When we refer to a moderate growth in same-store sales, it means the growth is relatively slower compared to newer concepts such as fast casual and fine casual restaurants that are replacing legacy fast food and casual dining restaurant concepts.
Some well-known fast casual restaurants such as Chipotle Mexican Grill (CMG) and Panera Bread (PNRA) have thrived, while Noodles & Company (NDLS) and Potbelly Corp. (PBPB) have not done so well. Chipotle Mexican Grill had a same-store sales growth of 16% in 2014.
Shake Shack (SHAK), which recently filed for an IPO, refers to itself a fine casual restaurant chain. Read a complete overview on its IPO filing in Shake Shack Filed For An IPO—What Investors Need To Know.
Investing in the Consumer Discretionary Select Sector SPDR ETF (XLY) is a good way of holding several restaurants, including 1.5% of YUM.
Yum! Brands has taken several other measures to attract more customers. We’ll look at some of these initiatives that Yum! Brands anticipates will benefit the company in the coming quarters.