Dining out is one market sector that took a serious pummeling in the down-turn economy. Just like every industry, the strong are now poised to not only survive but thrive in the coming year.
Poised for the most predictable growth is Yum! Brands, Inc. (NYSE:YUM). In 2008, this company continued to post double-digit growth. The sluggish domestic sales were cannily offset by cost-cutting domestically and expansion in emerging markets such as China. Yum! Brands Inc. (NYSE: YUM) regularly manages to maintain brand recognition while catering to regional tastes. Yum! has not slowed the company expansion plans overseas – plans remain on the table to open 1400 new sites, with 500 of them being in China. With a 10% profit growth projection, this is not the stock to overlook. This is truly a giant among world fast-food brands, starting to rival McDonald’s (NYSE: MCD) in much of the developing world.
That said, for a safe, reliable stock, McDonald’s (NYSE: MCD) continues to provide stable value. While not the stock most likely to see double digit growth, the value provided to the consumer at fast-food chains during a recession virtually guarantee continued growth in both gross sales and in stock value.
In looking at the giants, do not discount the potential growth value of some of the fast-food and low-end casual dining regional brands. With the changing demographics of America, the Chipotle Mexican Grill (NYSE: CMG) stands to grow significantly over the next three years. While the overall breadth of the menu is limited, this restaurant focuses on the quality of ingredients, offering a more authentic and less processed alternative to the Yum! Brands Inc. (NYSE: YUM) Taco Bell brand. In particular, Chipotle Mexican Grill (NYSE: CMG) to a significant stock price hit in the last 12 months, but their performance so far this year implies that they have weathered the storm. The last 8 quarters has been lackluster, but the company shows signs of having learned some hard lessons on how to successfully manage costs during regional expansions. Given the signs of economic recovery, Chipotle Mexican Grill sits in a market niche that will benefit first when people want something just a little better than traditional fast-food.
Finally, a similarly positioned sit-down restaurant is Buffalo Wild Wings (NASDAQ: BWLD). While a bit of a dark horse with investors due to almost 4 years of lackluster profit performance, the third quarter earnings for this company came in just under 30%, almost unheard of in this industry for several years. Value priced with a P:E of about 16 in June, 2009, there is a growth potential of almost 30% for this stock going forward, in particular given their international expansion plans.
At the end of the day, there is a basic human desire to have some one else take the dishes away. These companies can feed that desire, and families around the world, at a price they can afford even in a turbulent economy.