We mentioned fast food operator CKF in a light hearted fashion in yesterday’s afternoon report because KFC was struggling with lettuce supply and was being forced to use cabbage instead i.e. obviously to maintain “healthy” margins! The stock has significantly underperformed the market over the last 6-months which is even more noticeable because it’s not in the tech space and you’d think should be more defensive than it has been.
The company enjoys a comprehensive KFC footprint across Australia and is expanding in Germany & the Netherlands plus it has a growing number of local Taco Bells outlets. History tells that fast food like many discretionary spends prefer a booming economy but it does ok during economic downturns because of its cheap perception as opposed to classic table service restaurants i.e. it may struggle to rally in a recession but its downside should be limited below the $9 region if supply chain issues in both lettuce (and previously chicken) are overcome.
MM likes CKF into further weakness
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