We briefly note the following tidbits regarding McDonald’s (MCD; Buy), Taco Bell & KFC (owned by Yum Brands [YUM; Buy]), and privately-held Subway:
A simple Google search shows that multiple media outlets have, in the past, noted that privately-held Chick-fil-A is poised to become the third-largest restaurant concept in the U.S. (as measured by domestic systemwide sales) in the year 2020. Starting this past April, we began predicting that this will actually happen one full year earlier than these media outlets suspect — forecasting that Chick-fil-A becomes the third-largest restaurant concept in the U.S. in the year 2019. But — surprise! — there appears to be a growing and reasonable chance that Chick-fil-A leaps from 7th place in 2017 to 3rd place in 2018.
Earlier today, Starbucks (SBUX; Neutral) hosted its every-two-years Analyst Meeting, this time around in New York City. In our view, the strategic path that Starbucks laid out — under the “Growth at Scale” theme — looks reasonable to us. Also, on the positive side, the transition from Starbucks being “founder-led” to “founder-inspired” — always a tricky thing to navigate for pretty much any company of size — seems to have gone relatively well, all things considered (meaning, look at examples of companies that didn’t get that transition right). On the risk side of the equation, some of the most challenging risks are to a meaningful degree outside of Starbucks’ control, with Dunkin’ (owned by Dunkin’ Brands Group [DNKN; Neutral] recently launching its revamped espresso platform nationwide in the U.S.), and privately-held Luckin Coffee — which ended 2017 with zero stores in China — now at 1,700+ units in that key market (and growing rapidly). That said, Starbucks understands that its brand is different from others in the coffee marketplace, including (but not limited to) Dunkin’ and Luckin Coffee, and will seek to further differentiate the Starbucks brand going forward. We tweak our fiscal 2019E and fiscal 2020E EPS estimates downward by $0.01 each, to $2.65 and $3.00, respectively. We reiterate our Neutral rating on SBUX, and note the following: