Chain Restaurant Same Store Sales Components Still Negative

We’ve recently listened carefully to McDonald's (MCD), Starbucks (SBUX), Chipotle (CMG), YUM, Dominos (DPZ) and Darden (DRI) earnings calls for news on sales/traffic/mix components. Brinker (EAT) and the upscale Morton’s (MRT) and Ruth Chris (RUTH) are forthcoming. Steak N Shake (SNS) and CKE reported Q3 sales via 8K filings. Not all companies disclose the same store sales components.

In looking at the table below, we see little evidence of turnaround traffic or stellar marketing results thus far, for the recently released quarter. Only Steak N Shake really moved the traffic needle via their anniversary $.15/$.79 burger promotions and other efforts. Fine dining comps are tracking considerably worse, at –15% or more. Industry traffic fell off the table in September 2008, so some easier comparables will be evident later this year.

Company	Same Store Sales (SSS)	Traffic	Check/Pricing	Mix
YUM Worldwide	-1%	-4%	+3%	ND
SBUX (US)	-6%	-4%	-2%	ND
MCD Worldwide	+4.8%	up	down	ND
CMG	+1.7%	-3.5%	+6.5%	-1.3%
Steak N Shake (SNS)	+5.0%	+13.4%	-8.4%	ND
Darden—Olive Garden	-1.0%	-4.5%	+4%	0
Darden-Red Lobster	-1.0%	-5.0%	+2.5%	+1.5%

For modest decreases in the average check, depending on what’s being promoted and commodity cost conditions, usually a 7-10% increase to AUV is required to attain breakeven. The intellectual debate is whether the incremental marketing is a fixed or variable expense and should be in the calculation.

In May, Burger King (BKC) lost US and Mexican/ Germany sales momentum, as their marketing was perceived to be unfocused or featuring too high price points.

Its difficult to answer the question what would have happened without the discounting. But we note CKE’s (Carl’s Jr, Hardee’s) reported down (Carl’s –6.1%, Hardee’s, -3.6%) in Period 6 (June) but Carl’s in particular has high restaurant operating margins. CKE’s CEO Andy Puzder has said they will not over-discount and potentially diminish the brands. He recently said, “If people are selling something for $.99 it’s either inedible or they are losing money.” This strategy will be worth watching.

Disclosure: no stock positions.

Comments

[algo41:]

Thanks for the summary

Jul 24 08:45 AM