Some people like to bash fast-food chains – or more specifically, what they offer. It seems these people believe they’re the arbiters of what everyone should eat. They have a beef with companies such as McDonald’s Corporation (NYSE:MCD), Burger King Worldwide Inc (NYSE:BKW), Jack in the Box Inc. (NASDAQ:JACK), and others of their ilk.
Despite all the negativity, most people will make their own choices of what, when, and where they’ll eat. I guess that’s good old American freedom of choice. Some people hate these companies, while others enjoy fast-food dishes and the companies that provide them.
Do the jabs at these companies by “holier than thou” special interest groups hurt? They might be a bit of a nuisance – all the way to the bank. These companies are here to stay, and here’s why investors should consider them.
Consumers Truly Want What they Offer
The proof is in the sales. According to a report on March 11, 2013, at BurgerBusiness (burgerbusiness.com), “Now it’s possible to assemble a snapshot of the Top 7 chains (with estimated numbers for Wendy’s and Jack in the Box Inc. (NASDAQ:JACK); others’ numbers are from company filings). Combined domestic sales for these chains last year were $63.57 billion.”
For the full year 2012, McDonald’s Corporation (NYSE:MCD) global comparable sales increased 3.1%. Sales in the United States were up 3.3%. Yes, McDonald’s reported recently that global comparable sales decreased in February 2013 by 1.5%, and that their U.S. sales decreased 3.3%. However, the company noted that February of the prior year had one extra day due to the leap year. Considering this, McDonald’s global comparable sales were actually up 1.7%.
The above-mentioned $63.57 billion is a significant sales number (that’s just domestic sales); even a major increase in tofu and quinoa restaurants wouldn’t put too much of a dent in these sales in the coming years. Try asking your kids if they’d like a nice Friday night tofu burger and a salad next time they’re hungry. You know what the answer’s going to be… and so do the burger chains. Whether you like that fact or not, it’s something you, as an investor, should consider.
For the first quarter of fiscal 2013, Jack in the Box Inc. (NASDAQ:JACK) Chairman and CEO, Linda A. Lang, said, “Jack in the Box company same-store sales increased 2.1 percent and system same-store sales increased 1.9 percent in the first quarter. Jack in the Box system same-store sales growth for the quarter exceeded that of the QSR sandwich segment for the comparable period, according to The NPD Group’s SalesTrack Weekly for the 16-week time period ended Jan. 20, 2013. Included in this segment are the top 15 sandwich and QSR burger chain competitors.”
Jack in the Box recently reported their FY2013 guidance. The company expects same-store sales to increase roughly 1.5 to 2.5 percent at Jack in the Box Inc. (NASDAQ:JACK) company restaurants. The company also has their Qdoba restaurants. They expect same-store sales to increase about 1.0 to 2.0 percent at Qdoba restaurants. This might not be gangbusters growth, but it is growth nonetheless in a very competitive market.
Burger King recently reported fourth quarter and full year 2012 results. For the fourth quarter, system-wide comparable sales increased 2.7%. System-wide sales increased 6.7% (on a constant currency basis). Meanwhile, for the full year 2012, system-wide comparable sales increased 3.2%. System-wide sales increased 5.9% (again, on a constant currency basis).
Burger King experienced U.S. and Canada, Europe, the Middle East and Africa (EMEA), Latin America and the Caribbean (LAC), and Asia Pacific (APAC) comparable sales growth, to varying degrees. Investors should consider investing in companies with broad-based geographical footholds with expanding sales in each region. Burger King is also experiencing surprisingly strong performance in their growing Russian marketplace.
