Since its most recent market debut in the summer of 2012, Burger King Worldwide (NYSE: BKW ) has gone nowhere but up -- rising nearly 75% since that time. At a time when some of the fast-food juggernauts are struggling to keep their numbers trickling up, Burger King's laser-sharp focus is yielding some of the best results in the industry. In the recently reported quarter, the company delivered another round of positive traction on all fronts, despite domestic headwinds. Burger King's robust new store growth, largely in international locations, is proving to be a great deployment of capital. The question now is: Will the king continue its reign?
Even though the North America story echoed that of many of its peers -- bad weather and timid store traffic -- Burger King delivered big results from its EMEA segment, with same-store sales growth of 4.8%. The company continues to grow in Europe and emerging markets further east, with 340 new stores opened in the segment during the past quarter.
The Asia-Pacific region and Latin America always provide nice bumps in both same-store sales and revenue, driven by traffic increases and new store growth.
Compare Burger King to McDonald's, a company that, while still the fast-food leader by a long shot, has lost some of its edge (and market share) in recent periods. McDonald's menu innovation in the past year has included failed stunts such as Mighty Wings and products that drifted from the core customer. Burger King, on the other hand, enhanced its value menu in domestic markets with items such as the Rodeo Burger, a burger with BBQ sauce and onion rings (what could go wrong?). Abroad, its premium offerings are driving same-store sales growth.
Good from the get-go
When Burger King announced it was headed back to the public markets, this time with the help of a Bill Ackman-based JV called Justice Holdings, the company had a very investor-friendly plan: Introduce and quickly ramp up a franchise-based pipeline of stores overseas and reinvigorate the domestic image of the then-lagging brand.
Quick-service restaurants were stealing away share from full-service ones, and the company's Latin American-based owners and managers, 3G, had an eye for international expansion and cost-cutting. The strategy has been well-executed, and Burger King today is one of the best, if not the best, fast-food businesses available to investors.
Investors will want to keep an eye on domestic sales for the current quarter and going forward. As the bad weather has passed, Burger King should show some recovery in North America (it barely eked out a positive same-store sales gain in the recently ended quarter). While international growth will remain the headline story for the company (and hopefully justify its rich valuation), investors can look back at McDonald's for a case study on the effects of losing domestic market share. All in all, this remains a very appealing stock for growth investors, as Burger King looks poised to continue generating big returns.
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