Same-store sales growth
One of the key metrics that seasoned investors in the restaurant business follow is same-store sales growth. Same-store sales growth is used to measure the average sales growth at existing restaurant locations over a period, usually one year. So, if the same-store sales growth figure in the current period is higher than the previous period, it means that the company’s existing restaurant locations were able to generate higher sales in the current period compared to the previous period.
Yum! Brands China division catches air in December
Yum! Brands’ (YUM) latest monthly same-store sales update was released on January 12. The same-store sales growth for Yum! Brands’ China division in December came in at positive 1%, compared to negative 3% in October. According to the company, this growth was contributed by a 5% growth in its KFC (Kentucky Fried Chicken) business, which was offset by an 11% same-store sales decline at the Pizza Hut Casual Dining. Following this announcement on January 12, Yum’s shares were trading approximately 2.2% up pre-market on January 13.
Yum! Brands in 4Q15
For the entire 4Q15 quarter, Yum’s same-store sales grew by 2%, compared to the negative 16% the company saw in the corresponding quarter in 4Q14. While a 2% growth may appear favorable, indicating that the worse could be over, the negative 16% represents an easy comparison, implying that the present levels of same-store sales growth has still not yet reached levels the company had seen previous to the negative plunge.
You can access Yum! Brands through the Consumer Discretionary Select Sector SPDR ETF (XLY). McDonald’s Corporation (MCD), Starbucks Corporation (SBUX), and Chipotle Mexican Grill (CMG) make up about 8% of XLY’s portfolio.
In the next part of this series, we’ll take a close look at the same-store sales growth for Yum! Brands’ China division over the past three months.