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John Gordon

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  • Darden Restaurants' CEO Discusses Q3 2011 Results - Earnings Call Transcript [View article]
    June 28 2011, Darden (seekingalpha.com/symbo...) Q4 update: currently Darden is featuring Carbonara Ravioli ($10.95) and same with shrimp ($12.95), and has associated TV spot, but all I see on television is $6.99 unlimited soup, salad and breadsticks. Ad agency just burning off spare GRPs or a real media strategy thrust?

    John A. Gordon
    chain restaurant earnings and economics experts
    www.pacificmanagementc...//
    Jun 28 02:53 PM | Likes Like |Link to Comment
  • Jack in the Box's CEO Discusses Q2 2011 Results - Earnings Call Transcript [View article]
    Several interesting notes we heard from JACK's Q2 Earnings Call:

    (1) the Jack in the Box negative same store sales run has been effectively snapped, having been positive now in both Q1 and Q2. JACK (and other California centric QSR operators) were skewed by the CA/SW US slump but now recovering.

    (2) JACK remained true to its strategy of remodeling, improving core products and bundled/new meals platforms, with the $4.99 All American Jack the major media Q2 feature. Contrast this to the generally poor results of the $1 TV burger operator results. (BKC)

    (3) JACK has gotten only modest franchise margin leverage this far: with another 700 franchised stores, it's total EBITDA $ per franchisee was about $95,882 per store in 2010, versus $90,909 in 2006. Its getting about a 5% royalty and a 3.5% rent spread.

    (4) analysts were fully consumed tracking how JACK's AUVs and margins were changing on a real basis versus as a store operated mix basis, with more Qdoba and more franchisees. There were no questions on franchisees.


    John A. Gordon
    chain restaurant earnings and economics experts
    pacificmanagementconsu...
    May 23 06:16 PM | Likes Like |Link to Comment
  • Wendy's: Where's the Beef? [View article]
    My opinion is writer is far too pessimistic about Wendy's fundamentals. No doubt, Arby's will go down as one of the greatest restaurant collapses in history, but that is being dealt with via the disposition.

    Wendy's has done a great job in restarting and redefining menu development since 2008, and with its $1.4M AUV base (higher than Burger King who operates three dayparts), and second highest among the three major QSR opertators (MCD, WEN, BKC), it has a great platform to build upon.

    Wendy's is way late with breakfast, but it looks to be a significant potential runway for growth. But it will take time.

    We'll have a Wendy's note on SA in next day or so.


    John A. Gordon
    chain restaurant earnings and economics experts
    www.pacificmanagementc.../
    May 11 11:13 AM | Likes Like |Link to Comment
  • Ranking the Restaurant Stocks [View article]
    Nice article and rundown, thank you. We opine really the most important restaurant fundamental (versus investment community view) economic metric is strength of the store level economic model, after CAPEX.

    Same store sales is but a proxy for restaurant flowthrough, and profit flowthrough rate is not guaranteed.

    We like Stern Stewarts EVA metric and hope someday earnings are so stated, but we'll take free cash flow for now.


    John A. Gordon
    chain restaurant earnings and economics experts
    pacificmanagementconsu...
    May 5 10:35 PM | Likes Like |Link to Comment
  • McDonald's' CEO Discusses Q1 2011 Results - Earnings Call Transcript [View article]
    We are very glad Larry Miller from RBC asked about MCOpCo (company store) and franchisee margins, because otherwise there was little discussion and no direct questions on the comp sales breakout between traffic, check and price (implied at 1% in US.)

    Don Thompson mentioned customer counts have grown in recent years, and the Q1 newsrelease mentioned comparable sales and traffic together in the same sentence, so...traffic must have been up and check down.

    Interestingly, the two other burger (seekingalpha.com/symbo...) QSR majors that reported in April (Burger King and Carl's/Hardees) both had negative traffic and positive check, just the inverse of MCD.


    John A. Gordon
    Pacific Management Consulting Group
    chain restaurant earnings and economics experts
    www.pacificmanagementc...
    Apr 25 10:06 PM | Likes Like |Link to Comment
  • Why Chipotle Could Eventually Choke on Valuation [View article]
    Nice article, but I'd speculate instead that Chipotle's (CMG) success and current valuation support will be driven by current fundamentals, such as:

    (1) number of new units that can be found in existing and new US markets, either the basic unit site or the lower cost, efficient type a site, designed for infills or conversions.

    (2) whether CMG has enough of its elite restauranteurs and other store management ready to open new units

    (3) macroeconomic factors, such as employment, income, disposable income, gasoline.

    (4) store level economics: covering commodity costs.


    John A. Gordon
    chain restaurant earnings and economics experts
    pacificmanagementconsu...
    Apr 20 01:03 PM | Likes Like |Link to Comment
  • Ruby Tuesday's CEO Discusses Q3 2011 Results - Earnings Call Transcript [View article]
    Ruby Tuesday (RT) certainly is a beehive of activity. More than the weather and earnings miss story, that Ruby is working defranchsing to the magnitude of 73 units was notable to us.

    The RT 10Q hasnt been posted yet, but seems total debt increased by $128M, so we dont know the multiple yet. Sandy noted some franchisees with high debt were acquired.

    RTs detail of some midwestern and southern market sales softness does track similar to the 2007/2008 declines excluding the sand state problems (CA, AZ, FL, NV) which were weakening for some time.

    John A. Gordon
    Pacific Management Consulting Group

    chain restaurant earnings and economics experts
    pacificmanagementconsu...
    Apr 7 11:54 AM | Likes Like |Link to Comment
  • Darden Restaurants' CEO Discusses Q3 2011 Results - Earnings Call Transcript [View article]
    The Darden (DRI) earnings calls are always interesting.

    Looks like the company's strategy of prereleasing estimated Q3 same store sales and earnings on January 31 was successful in that it created a secondary story and blunted the inevitable Olive Garden/Red Lobster story.

    While both Olive Garden and Red Lobster posted negative traffic (weather), Red Lobster outperformed both Mitchell's (RUTH, SSS -2.1%), and McCormick and Schmick's (MSSR, SSS minus 1%).

    DRI has extracted well this year, with sales being up $260M and EBIT up $75M, for first three quarters, for a corporate EBIT flow through of 29%.


    John A. Gordon
    Pacific Management Consulting Group

    Chain Restaurant Earnings and Economics Experts
    pacificmanagementconsu...
    Mar 28 12:56 PM | 2 Likes Like |Link to Comment
  • McDonald's Customer Spending Levels Looking Up [View article]
    We like Trefis, and it is a nice tool, and hope to work with it to understand its assumptions more fully.

    However, MCD average spend per transaction in the United States is in the $5.50- 5.75 range, with higher likely in Europe. MCD sells about 4 individual menu items per transaction.

    Our sense (and as per MCD) is that MCD transaction count is up slightly and average check is down a bit, due to the increased coffee sales mix.


    John A. Gordon
    Chain Restaurant Earnings and Economics Experts
    pacificmanagementconsu...
    Mar 11 10:51 AM | 1 Like Like |Link to Comment
  • Denny's Shares Could Soon Be Selling Like Hotcakes [View article]
    There is no doubt that Denny's is now innovating creatively, the question is whether it will work in time.

    DENN went through M&A hell in the late1980s, shareholder litigation at same time and later had nasty civil rights violations problems and market image perceptions in the 1990s, lost great momentum and market share in the 2000s and then fought the proxy battle in 2010. An all new senior executive team is in place, with alot of diverse restaurant experience.

    Prior CEO set the stage for todays more robust innovation platform; watch franchisee profitability closely. Selling company units is a strategy that works for only so long.

    Disagree with this author that slow economic recovery will benefit DENN, its all about the employment and disposable income.

    John A. Gordon
    pacificmanagementconsu...
    chain restaurant earnings and economics experts
    Mar 7 10:04 AM | Likes Like |Link to Comment
  • McDonald's' CEO Discusses Q4 2010 Results - Earnings Call Transcript [View article]
    Interesting call. The matter of quality of earnings didn't come up at all, with free cash flow lagging behind GAAP earnings (per the Georgia Tech Financial Lab's note Friday). The reason is the amount of capital spending (new stores and remodels) which tends to be clumpy. Perhaps this is another metric that needs to be measured on a CAGR basis.

    Interesting to note that no price increase taken in FY-10 adds to pricing flexibility..but MCD's comps have this year (5%) been above the 2-3% they say they need to cover inflation.

    The average check issue came up only at the end where Howard Penny tried to make the link between value, check and traffic. While the beverage strategy only is so meaningful, it often takes years to sear new products' association into consumers minds. Logically, beverages are a sales layer. MCD didn't break out check and traffic other than to say traffic up more ergo check down. But there are plenty of other concepts that can't balance the two and keep the same store sales positive, but MCD did.


    John A. Gordon
    Chain Restaurant Earnings and Economics Experts
    pacificmanagementconsu...
    Jan 24 05:51 PM | Likes Like |Link to Comment
  • Darden Restaurants CEO Discusses Q2 2011 Results - Earnings Call Transcript [View article]
    We know that quarterly earnings calls are focused on near term review and forecasting, and DRI has a investor day next month. But this earnings call question themes almost totally missed the long term Darden drivers:

    (1) international development (not one comment or question)
    (2) remodels (thanks to Joe Buckley for finally asking and Matthew Dowd for having a response at the end)
    (3) acquisitions to meet the long term DRI 10-15% growth goal. (not one question).

    It was interesting that the company bowed to the questions and vowed to never again have a promotion schedule (Red Lobster Endless Shrimp promo timing) that didn't jive with the fiscal quarter calendar. That REALLY speaks to overemphasis on same store sales metric !

    Finally, that DRI's "gap to Knapp" index is narrowing is no surprise. Knapp has 40 concepts in its index, and certainly DRI foremost in size, scope and marketing power. Knapp consolidated same store sales have improved from minus 8 in July 2009 to app. plus 1 in November 2009. DRI isn't going to improve from as deep as a hole as other casual operators were performing.

    John A. Gordon
    Chain Restaurant Earnings and Economics Experts
    pacificmanagementconsu...
    Dec 22 02:50 PM | Likes Like |Link to Comment
  • Meritage Hospitality Group: Valuing the Company on an Earnings Basis [View article]
    Interesting extract...and timely given the closure of 16 O Charlies and 99 Brand restaurants announced today. However, I believe writer needs to consider considerable higher start up costs for the new "Twisted Rooster" concept. I've rarely seen reflags work as planned.

    John A. Gordon
    Chain Restaurant Earnings and Economics Experts
    pacificmanagementconsu...
    Dec 13 12:30 PM | Likes Like |Link to Comment
  • A Return to Growth at Cheesecake Factory [View article]
    Interesting. CAKE is an amazing business but has only 165 units and works best in high profile, primo Grade AAA locations. Think North Michigan Avenue in Chicago. There are only so many of those sites, until one considers international expansion.

    Recommend writer consider commodity cost inflation as a factor, as well as retail/shopping mall trends.
    Dec 3 01:38 PM | Likes Like |Link to Comment
  • Jack in the Box CEO Discusses F4Q2010 Results - Earnings Call Transcript [View article]
    Several interesting JACK notes here:

    First as correction, when asked about franchisee percentage margins outperforming company, CFO Jerry Rebel noted franchisees with higher prices and lower labor as the reason. Transcript was in error.

    Secondly, Jerry mentioned that refranchsing cash flow was typically used for stock buybacks. Jerry then ascribed the 2010 refranchising to be $.04 to $.05 accretive, about $25M in gains.
    So we wonder if the refranchising is not earnings accretitive afterall, excluding the buyback effect.

    And you could sense the frustration when Susquehanna asked why not keep some units. This is the age old company vs. refranchising debate, and the math of loss of restaurant level margin less G&A savings ($30K-40K), versus savings of company CAPEX and royalty stream.

    Finally, note JACK is doing franchisee incentives: $20K per franchisee for remodels, cutting Qdoba initial franchise fee and royalties in target markets.


    John A. Gordon
    Chain Restaurant Earnings and Economic Experts
    pacificmanagementconsu...
    Nov 24 01:38 PM | Likes Like |Link to Comment
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