Chicken Stock: Something to Consider in an Investment Soup?
Michael is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Why did the chicken cross the road? Maybe to get out of the sightlines of companies who are capitalizing on the propensity of consumers to eat more poultry and less red meat? With McDonald's Corp. (NYSE: MCD) exploring the chicken wing market, to add to their McChicken, Chicken McNuggets, and McBistro chicken sandwiches, chicken is "in" – if it was ever really out. McDonald's isn't only a hamburger stock – the Company has chicken written all over it as well.
McDonald's will test their chicken wing offering in Chicago this week. They already had a successful test of the product in Atlanta. McDonald's typically knows what they're doing. They, and many other companies, see that consumers want fast, inexpensive, menu offerings - of the comfort food style. Despite the " leafy greening" of menus in a host of establishments over the past few years, consumers, whether they like to admit it or not, sometimes just want a good greasy meal.
Do you remember Grandma's chicken – on the stovetop, nestled in hot grease, and smelling and tasting fantastic? Grandma knew what she was doing too – her business model was to keep the family happy and fed with simple, delectable, no frills, hot fried food. It's something akin to the business model Buffalo Wild Wings (NASDAQ: BWLD) is built on, with their family of signature sauces and seasonings. They have a business built on chicken wings, beer, and sports. The TV's are on, the deep fryers are going, damn the torpedoes; we'll check our cholesterol later.
For the third quarter ended September 23, 2012, Buffalo Wild Wings total revenue increased 24.8% to $246.9 million versus the same period a year prior. Company-owned restaurant sales grew 26.2% to $228.4 million. In addition, same-store sales increased 6.2% at their company-owned restaurants and 5.8% at franchised restaurants. Again, a simple product, prepared the way consumers like them, at a fair price and artistic plate presentation not part of the equation. If you want your pâté de foie gras – well, you'll have to get your "fat liver" elsewhere.
Companies with everyday food products of this sort offer some stability when it comes to investing. They're not get-rich-quick stocks, and they're not even sure things because we've learned there is no such thing when it comes to investing. However, they don't have a tendency for setting us on a roller coaster ride where we're sure to regurgitate a chicken bone or two during scary economic downturns.
Sanderson Farms (NASDAQ: SAFM) posted a profit during the Company's fourth quarter (the three months ended Oct. 31, 2012). Higher poultry prices saw the Company earn $9.3 million, or 41 cents per share. This is in comparison to a loss of $21.6 million, or 97 cents per share, a year prior. Sanderson Farms earned $53.9 million, or $2.35 per share, for the full year. In the prior year, they lost $127.1 million, or $5.74 per share. Annual revenue rose 21 percent to $2.39 billion from $1.98 billion.
Either restaurants, fast food and otherwise are offering and ordering more chicken from Sanderson Farms and others, or people are buying more in supermarkets to take home. The answer is, both scenarios are accurate. The trend seems to be that restaurants and consumers together will continue to explore more menu options with chicken – and by extension turkey as well. Red meat does get some bad press - chicken is the go-to lunch and dinner option when this happens. Restaurants know this – they're working hard to keep those chickens nearby - on their side of the road.
Fool blogger Michael Ugulini owns shares in McDonald's Corp. - long. The Motley Fool recommends Buffalo Wild Wings and McDonald's. The Motley Fool owns shares of Buffalo Wild Wings, McDonald's, and Sanderson Farms. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!