When the economy gets tough, eat fried chicken. This must be the mantra of many Britons; at least, that's the way Yum! Brands (NYSE: YUM) is betting. The company this weekend announced it was opening 200 to 300 new stores in north England and south Wales over the next few years, increasing its current concentration by about 30%. On top of relatively good earnings reported for the fiscal fourth quarter earlier this month, Yum! Brands is looking almost ... optimistic. Could it be?It could. Not only is KFC opening outlets in England and China as the rest of the world cowers in job-cutting fear of the Things To Come, but the stock is in a hopeful place; at about $28.70 this afternoon, up 0.24% on the day and, having recovered from a low near $22 in November 2008, seemingly headed in an upward arc toward its year-ago territory above $35. At this price, and with this great hope for the future, KFC could be a good buy.
And what about those worldwide economic trends: do they look good for KFC and its ilk? For the near term, in the next few years, I'd say yes. As consumers increasingly experience layoffs and reduced income, convenience food is a hard habit to break, so people are turning toward fast, cheap comfort food; KFC is the ideal choice. As worker look for new jobs, they'll end up turning more and more to the service industry, where jobs are plentiful (and wages are low); it's instructive that British headlines surrounding the new KFC stores all included the 9,000 new jobs that might be created by the investment.
Long term, if the global recession continues and deepens, consumers will stop choosing unhealthy fast "comfort" food and instead choose to buy chickens whole, stretching them to last for several meals, mash their own potatoes, and make gravy from the drippings. In five years, if you're pessimistic? YUM is a terrible buy. However: fried chicken-loving optimists will probably be licking their fingers after buying this stock now.
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Reader Comments (Page 1 of 1)
2-18-2009 @ 11:56PM
El Taco said...
And thus began the age of the obese british dude, and the overweight American laughing at him.