Is Super Chix The Answer for Yum! Brands?

Yum! Brands hopes that its new Super Chix concept will become a hit with "the last true chicken sandwich."

Apr 15, 2014 at 11:15AM

The news last month that KFC is no longer the top chicken chain in the U.S. must have Colonel Sanders rolling over in his grave. Chick-fil-A was the top-selling chicken chain in the U.S. last year with $5 billion in sales to KFC's $4.22 billion. The news is certainly a disappointment for Yum! Brands (NYSE:YUM). Besides Chick-fil-A, KFC also has to deal with Popeyes Louisiana Kitchen (NASDAQ:PLKI) looking to grow its share of the U.S. chicken market.

Popeyes and Chick-fil-A are outperforming KFC
KFC ended 2013 with about 4,500 restaurants in the U.S. Chick-fil-A had 1,775 restaurants located primarily in the southern part of the U.S. Popeyes had 2,225 restaurants in the U.S. and internationally.

Chick-fil-A excels in per-store sales. The average Chick-fil-A location generated about $3.2 million in sales, versus only $938,000 generated by the average KFC location. Where it gets even more embarrassing for KFC is that Chick-fil-A restaurants are only open six days a week--they're closed on Sundays.

In terms of same-store sales last year, Popeyes and Chick-fil-A both saw their same-store sales rise 3.6% last year in the U.S. KFC, on the other hand, saw its same-store sales drop 2% for the year.

Here comes Super Chix!
Yum! Brands looks to refresh its chicken image with a new concept called Super Chix. Super Chix calls itself the purveyor of "the last true chicken sandwich." The menu lists a chicken sandwich as well as chicken tenders, fries, frozen custard, salads, cole slaw, hand-squeezed lemonade, and fresh-brewed iced tea. The menu looks similar to that of Chick-fil-A, but it is more limited.

Yum! Brands has opened its first Super Chix location just outside Dallas. Yum! Brands chose Dallas because that is where the company's new concept team works out of the Plano, Texas headquarters of Pizza Hut. The company has kept quiet on its long-term plans for the concept, although it has said that it is considering Super Chix as a growth concept.

One key difference is breakfast
One area where Chick-fil-A excels is in breakfast. KFC does not serve breakfast and Super Chix has no breakfast menu items. That's no big deal for Yum! Brands right now as it's focused on rolling out its Taco Bell breakfast menu. The new breakfast menu from Taco Bell is part of Yum! Brands' efforts to challenge McDonald's, Burger King and Chick-fil-A in the breakfast category, Taco Bell has launched an aggressive marketing campaign to raise awareness, and so far the response for its A.M. Crunchwrap, Waffle Taco and other items has been positive according to the company.

What about KFC?
Over the last few years, the primary focus for KFC has been on its China business. While KFC has reduced its store count in the U.S. from 5,500 locations in 2004 to about 4,500 today, the chain has grown to become one of the largest fast-food chain in China. KFC China just launched 15 new menu items which include two chicken sandwiches, three rice dishes, four snacks, and six drinks or desserts. Its menu now has a total of 66 items.

In the U.S., KFC has launched a new concept called KFC Eleven that it opened near its headquarters in Louisville, Kentucky. Customers walk down a line and see employees make their food in front of them, similar to the service at Chipotle Mexican Grill. The menu contains chicken sandwiches, rice bowls, and flatbreads. KFC plans to open a second location in Louisville this year and it opened a similar concept called KFC Select in Canada last December.

How do shares compare?
Since Chick-fil-A is privately owned, we can only compare Yum! Brands with Popeyes Louisiana Kitchen.

 

Market Cap

Forward P/E

Total Cash

Total Debt

Dividend Yield

Yum! Brands

$33.30B

17.95

$573.00M

$2.99B

2.00%

Popeyes

$982.69M

21.49

$9.60M

$67.20M

N/A

Source: Yahoo! Finance

Foolish assessment
While I think Super Chix has potential, it's not big enough to move the needle for Yum! Brands. I do like the menu and think that if the menu items resonate with Super Chix customers, then Yum! Brands could put those items on its KFC menus. I think some new menu items would go a long way toward boosting same-store sales at KFC in the U.S.

Overall, I like Yum! Brands and the initiatives the company is taking with Super Chix, its new menu items at KFC China, and its new breakfast menu at Taco Bell. The company's balance sheet is in great shape and its shares are trading at less than 18 times next year's earnings. For long-term investors, the future for Yum! Brands looks bright.

Say goodbye to 'Made-In-China'
For the first time since the early days of this country, we’re in a position to dominate the global manufacturing landscape thanks to a single, revolutionary technology: 3D printing. Although this sounds like something out of a science fiction novel, the success of 3D printing is already a foregone conclusion to many manufacturers around the world. The trick now is to identify the companies -- and thereby the stocks -- that will prevail in the battle for market share. To see the three companies that are currently positioned to do so, simply download our invaluable free report on the topic by clicking here now.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers