Poor Yum! Brands (YUM). The company has some high-profile trademarks in its portfolio, and it competes vigorously with Burger King (BKC), McDonald's (MCD), and Wendy's/Arby's Group (WEN). It's a competent player in its field. Sometimes, though, that just isn't enough. Tuesday, during the after-hours action, the stock was sold off, losing over 3% of its value.And this was after the owner of KFC, Pizza Hut, and Taco Bell beat earnings expectations in the second quarter. It's a funny thing, though: You can top estimates all you want, but if your guidance isn't so hot, your stock isn't guaranteed to respond in the positive direction.
According to the earnings report, Yum delivered 58 cents per share on an adjusted basis. Projections called for 54 cents per share. Not bad. Plus, China continues to offer excellent growth opportunities for the company.
Unfortunately, here are two bad points to the story. Firstly, we have the lousy guidance I just alluded to. According to Benzinga.com, analysts would like to read about full-year adjusted profits of $2.48 per share, but the company's outlook is for $2.43 per share. Secondly, same-store sales in the United States just aren't cutting it. They were flat in Q2, and flat is most definitely not what investors want to see. I mentioned back in April that Yum! Brands has to get serious about comps in the domestic market. I guess I'll just have to reiterate the sentiment. Comps really are key to a chain of stores or restaurants; new marketing campaigns are in order when they become stagnant and/or decline.
Nevertheless, long-term investors can continue holding the stock, in my opinion. I'm not sure if traders should step in at this juncture, but for those with patience, the equity may reward down the line. The press release shows that cash flow is doing fine, and when you consider the potential for the brands owned by this entity, you've got to have a fair amount of optimism for the future.
Disclosure: I don't own any company mentioned; positions can change without notice.
The Money Man Behind Rick Santorum: Who Is Foster S. Friess?
Savings Experiment: Snow Removal


Reader Comments (Page 1 of 1)
7-14-2010 @ 9:59AM
D said...
What I would like to see from Yum! brands is an effort for them to attempt to go back to basics many of their brands, namely A&W. I'd like to see Yum! brands attempt to take an intrapreneurial (not entre-) effort to revitalize it's food quality first (from the inside) by re-branding and re-imaging it to what it once was before. Their previous attempts by creating expensive and decorative free-standing buildings and catching interior decorations do little to make the bad taste of the food go down any easier.
A&W use to be a great place to park and eat drive-in style. However, due to ever increasing cost cutting efforts and a lack of quality control, A&W is now a dismal failure to it's name sake. About the only real good product they still have is it's Root Beer Floats and frosty mugs, and that is it. Forget about the hamburgers and hotdog's, it's pretty much just second rate cafeteria food no kid in a high school would want to eat, even for free lunch.
The overall food quality is far below anything worth bragging about, and consumers are left with little to no quality expectations.
The franchising of it's products include bundling it's brands into multi-brand locations, such as Pizza Hut/Taco Bell, A&W/Long John Silvers, etc., is only a last ditch effort to capture some of the demand it once had for it's failing fast-food products. While these places attempt to bring in more customers, it does not offer the quality it once did before.
I believe if any corporate owned fast food restaurant wants to succeed, they may want to take a deep look into the quality and branding that In-And-Out has created for itself. They seem to remain loyal to it's quality first over expansion and capitalism motives.
7-14-2010 @ 11:27AM
D said...
Sorry, need to make a correction regarding a line I wrote, "Forget about the hamburgers and hotdog's, it's pretty much just second rate cafeteria food no kid in a high school would want to eat, even for free lunch."
Essentially, what I mean to say is this, it's not just A&Ws food quality that's barely tolerable, but most corporate fast food in general. But it is the privately owned and operated businesses that have taken a que from these corporate flops by going back to basics regarding quality is prime to customer needs.
7-14-2010 @ 11:32AM
D said...
Not owned by Yum! Brand
Sonics Bottom Line:
Just like so many good places in the past that were good to eat at, I remember Sonic while living in Arizona back in the mid 70s, and again in Texas back in the mid 80s. Both era's and times experiences were pleasant. However, I believe due to expansion, the product quality has gone down. It is my belief that, just like so many fast food
restaurants that have gone the way of corporate expansion, quality always seems to end up taking a dive.
There's always a need to attempt to keep costs down and it ultimately affects the food. Shiny new buildings and fancy interiors unfortunately do not make the taste and food go down any easier.
If there is a problem with sales at Sonic, as well as any other fast food franchise, take a closure look at the real quality of the food first. I'm sure you will definitely find that the problem lies there first. And of course, service plays a huge factor as well. But in some cases, it could easily be due to a lack of management and cleanliness as well. I for one would not eat at a fast food restaurant that does not spend any time cleaning it's tables
restrooms.
Additionally, not a point to the problem but a area of concern. Many fast food restaurants have over-the-top ice fill machines for its soft drinks. I have found in several places that most of these fast food restaurants do not keep the covers on due to the constant need to fill them. Though this may not sound like a real problem, over
time, it does become a health related issue. The problem lies with dust and flying insects that may their way into the ice machine, and ultimately into your soft drink.
Fast food restaurants are trying so hard to compete for dollars at the risk of cutting corners and low quality food at seemingly low prices. But the overall cost saving to consumers is more a risk the cost benefit. The low cost products are generally industrial grade food product fillers that make up much of the fast food items unsuspecting people often buy. That is, hamburgers with additive and
fillers, as well as hotdogs, chicken and fish fillets, shakes a host of other products.
Only a few restaurants that have not yet become public, such as In-And-Out, still attempt to keep the ingredient as fresh as possible without the compromise to quality, by keeping it simple and cost affective. However, there is word that they too may expand. And if that does happen, there may eventually be a compromise to quality
to their product. Hopefully, they realize that their success is due in part to the high quality of their food and not the bottom line.
While there have been many great old time places to eat, such as A&W, Wendy's, McDonald's, Sonic, just to name only a few, these companies have settled to compromise on quality and freshness while still trying to remain relevant and public. But this will soon catch up with them. Their bottom lines will collapse and their franchises will
fail. McDonald's is a prime example of quality gone totally out the window. They're just a pale reminder of a good memories gone long ago.
7-14-2010 @ 11:38AM
D said...
By the way, I know I mention In-And-Out quite a bit, but I don't want to come off as sounding like I am endoresing them. I use them as an example of good marketing and meeting the needs of thier customers' satisfaction highly.
If only In-And-Out would consider just adding one more item to their menu, namely Bacon. That would be just awesome. Even if it were bacon bits. My suggestion would be for In-And-Out to use pre-packaged packages of Real Bacon Bits; to give to their customers, just like they do with their yellow peppers.
7-14-2010 @ 11:45AM
D said...
This post was regarding McDs ban on Toys, and how it may effect it's bottom line.
Sadly, without the toys, buying a happy meal is
pointless...especially for collectors. Frankly, the food is barely palatable at McDs.
It is my belief that the overall quality of McDs has gone down so much, it is just a matter of time before they're going to start loosing business on a global proportion. There is absolutely no way they can begin to compete against In-And-Out for Quality of product...even by price. And if you are unfortunately not living in a area that offers an In-And-Out, then it would be hard for me to explain why they're just hands-down better.
Anyway, I digress...toys, right? Well, without the toys and the long gone McDs characters, like the Hamburgler, Captin Crook, Grimace, Mayor McCheese, BigMac & BigCheese, Birdie EarlyBird, any many more, then what's the point of even going to McDs?
Bring back decent quality food, stop trying to be so darn "Politically Correct," and health conscious...people what they're eating, and just be McDonalds that we all remember and loved.
7-14-2010 @ 12:08PM
D said...
Regarding Fast Food and Toys:
OK, so many of you remember back in the day...taking a quick break from work, driving to McDs, and buying a Happy Meal for the toy. Yeah, we all pretty much did this. And it really wasn't much for the food though.
Well, my childhood goes back even further, to a time in the early 70s, dining at Sambo's and Bob's Big Boy restaurants. These are two of my fondest restaurant food and atmosphere, and toy related places I remember most from way back them.
Sambo's had little Sambo and the Tigar, and I still have both stuffed dolls on my library bookshelf. What I remember most about Sambo's was the smell of hot syrup and pancakes as we would walk in the restaurant. Oh yeah, I also have one of the original lighted decorative signs they use to have hanging above the cooks area. Mine is of Little Sambo holding a plate of pancakes and his umbrella. Those were really good times.
In the mid 70s, while in Flagstaff, AZ, we use to go to Bob's Big Boy every weekend. Yeah, I also have a Bob's Big Boy bank doll too. However, I really don't remember the quality of the food as much as I just remember the place. But I do remember enjoying going there.
After moving back to California, our Sambo's closed down, we had no Bob's Big Boy, and our A&W also closed down. But we had The Boss. The Boss is a small family owned and operated hamburger stand in Oroville, CA. They've been around for at least 30 years now, maybe longer. And they make, I swear it on my mother's passing, the absolute best hamburgers in California. However, no toys and no gimmicks, just real honest high quality ingredients.
Oh, I forgot to mention Denny's. OK, we didn't have a Denny's in Oroville, but we did in Stockton, CA. The absolute best line I ever heard was this. While my mother and I were eating breakfast one morning, we had a regular server there that was really funny, but can't quite remember his name now. Anyway, a waitress had a sauser with a dinner roll and butter on it, and as she turned her head to get something else, the roll fell off the plate and onto the floor. You know, I think his name was Benny. Anyway, he yelled at here and said, "you dropped your buns!" I nearly choked laughing so hard.
Sadly, Denny's was never a Bob's nor Sambo's. And they stopped cooking long ago and never went back. Stopped cooking is reference to there new slogan, "We're cooking Now." I'm still a bit confused to what they mean by that.
Again, fast food and restauants really need to meet the needs of families, including children. Toys are not a bad thing. It's really up to parents that need to be in control of their eating and dining experience and how they educate and encourage proper eating. And eating out can still be fun and good for you. You just need to demand it.