- why Yum! Brands' recent results shouldn't sour you on China;
- how to play IZOD's recent sales growth; and
- on feeling smacked by the roller coaster that is fiscal cliff negotiations.
Don't Let Yum! Turn You Into a Chicken Posted at 11:15 a.m. EDT on Friday, Nov. 30 Did they turn on the Colonel in China? The shocking news of a decline in KFC sales in the People's Republic sent shockwaves through parent Yum! Brands (YUM - Get Report), as well as the usual suspects that have great Chinese franchises, including Coach (COH), Starbucks (SBUX - Get Report) and Nike (NKE). The comparisons that Yum! was going against were staggeringly fabulous, virtually unbeatable, a 21% comp store rate, but that doesn't mean we can excuse a minus 4% number. Remember, as much as Yum! is based in the U.S. and has iconic names such as Pizza Hut and Taco Bell under its roof as well as KFC, China accounts for 44% of its sales, and we think of Yum! as a Chinese dog with an American tail. So does this mean that China, which has been showing signs of life, is backsliding and that all of the big expansionist data we have been getting are false tells? I am going to put it on the line: absolutely not. There are too many good things happening in China, including a series of bank reserve injections that have really boosted industrial growth. As for the U.S. companies that are linked with China, it's been a real mixed picture of late. Nike, for example, has had a very nice run in the U.S., but China has been a big disappointment, including concerns of too much inventory. Coach continues to have a robust business in China and is expanding rather rapidly there. Its recent weakness comes from the U.S., not China. Starbucks? I think China is the growth story there, with the biggest issue being the very high-quality problem of lines that are too long. I think we will hear amazing things about China when Howard Schultz has his analyst conference in New York on Dec. 5. In fact, I would use any weakness in Starbucks off Yum! to buy Starbucks ahead of the meeting. With Europe under control, U.S. doing quite well, China expanding and India blooming, not to mention the splendid addition of Teavana to the family, Starbucks has a terrific story to tell.