Wendy’s Trying to Generate Interest
Thursday, March 9th, 2006
By George Leong, B.Comm. for Profit Confidential
In the world of java, Starbucks Corp. (NASDAQ/SBUX) is the growth stock for coffee houses. Nothing else comes remotely close. The company has over 10,000 retail outlets and can be found at nearly every street corner in any major U.S. city.
What is impressive has been the consumer’s willingness to pay as much as $5 for a large cappuccino or latte. Add in one of those delicious soy-based banana muffins and you are out $7. This is how Starbucks built its coffee empire since starting up just over 10 years ago by Howard Schultz. Some companies have tried to emulate Starbucks, but to no avail. Its brand recognition is massive and global in nature. Even in China, consumers are willing to pay over $4 just to see what the fuss is all about. In comparative terms, that is more than the average Chinese makes in a day.
Now Wendy’s International Inc. (NYSE/WEN) is trying to generate some interest to rejuvenate its business, which has quickly fallen behind fast food king, McDonald’s Corp. (NYSE/MCD). There is also news that second tier fast food chain, Burger King Holdings Inc., is looking at an IPO.
In the case of Wendy’s, it is planning to offer up to 29 million shares of its coffee and donut chain, Tim Hortons, in soon to be IPO. Tim Hortons, established in Canada to great success, has been more of a struggle in the ultra competitive U.S. market. Timmy’s, as it is referred to in Canada, has 2,597 stores in Canada and only 288 stores in the United States. Essentially, it is a Canadian company.
In the U.S., Tim Horton’s wouldn’t make it on the radar of most investors and probably won’t. Starbucks is king and will not be pushed from its perch. The trend in the U.S. for coffee houses is somewhat mature, which is the reason Starbucks is looking at China to boost its growth.
Tim Hortons says its wants to expand its number of stores in Canada to between 3,500 and 4,000, while adding just over 2,000 stores in the U.S.
My feeling is Tim Hortons will find it difficult in the mature U.S. market, especially since it is not recognizable by the majority of Americans. But, drive in Canada and you see a Tim Hortons everywhere and you have to wonder how much more it can expand in Canada.
The reality is Tim Horton is ambitious, but it will take a lot more than donuts to attract coffee drinkers in the U.S. I question the potential of Tim Horton’s as an IPO and would stay with the market leader in Starbucks.
Next Post: The Apple Doesn’t Fall Far From the Tree
Previous Post: Great Investment Opportunities
Tweet
Sign Up for PROFIT CONFIDENTIAL and
receive a FREE copy of our exclusive report:
"A GOLDEN OPPORTUNITY FOR STOCK MARKET INVESTORS"
We respect your privacy and
will never share your e-mail address.
George is a Senior Editor at Lombardi Financial, and has been involved in analyzing the stock markets for two decades where he employs both fundamental and technical analysis. His overall market timing and trading knowledge is extensive in the areas of small-cap research and option trading. George is the editor of several of Lombardi’s popular financial newsletters, including The China Letter, Special Situations, and Obscene Profits, among others. His trading advice on stocks and options is also found on his daily trading site, Daily Profits. He has written technical and fundamental columns for numerous stock market news web sites, and he is the author of Quick Wealth Options Strategy and Mastering 7 Proven Options Strategies. Prior to starting with Lombardi Financial, George was employed as a financial analyst with Globe Information Services.
