Betty Blowtorch

Tough Road Ahead for Texas Roadhouse

Like a lot of companies, TXRH needs to embrace inflation. It's here and it ain't going away so adapt. TXRH, PNRA and others should maintain margins by hiking prices as needed. TXRH can try to maintain traffic by offering some cheaper cuts or proteins at lower price points. If they can't pass through the higher cost of biscuits ("made from scratch!") or other items, then 86 them. Traffic is going to slow regardless and can't be controlled. Margins are controllable.

Restaurants that take price and give up traffic are just successfully adapting to the new world order. Unfortunately, most want to maintain traffic and are willing to take huge margin hits to do so. Lower margin/same traffic is the most common outcome. Higher margins, less traffic is a better option.

It's the Seventies all over again, get used to it.

Chipotle Should Bounce Following Weak Report

New unit volume declined double digits. Estimates for 2008 are still very aggressive. At least the drug addled $2.85 estimates for next year should go away.

This was the first miss (though Piper claimed it was in line) after beating estimates by huge margins in all prior quarters. A great company but sell into the bounce and buy it at $80 in a month or two.

The Case Against Overstock.com (OSTK)

It is too bad that Jeff Matthews is a moron. If he was just slightly smarter he could have understood my reports on Overstock.

In the initial report, I described Byrne as like Bode Miller in his approach to managing Overstock. Bode Miller is as famous for winning as wiping out. All or nothing. I doubt many investors are looking to go long companies in which 50% of the expected outcomes are zero (nor 25% or 40%). Under a bullet point headed Mercurial management, I wrote:

However that approach assures a wider range of outcomes than some investors may be comfortable with—see Bode Miller’s route to the World Cup downhill skiing title.


It was an observation more likely to quicken the pulse and warm the hearts of short sellers.

Jeff Matthews, who writes a blog and claims to be a hedge fund manager, somehow obtained my report though he did not trade with that firm. In his blog, he observed that:

"The most bullish "consensus" analyst, as I can see, is Craig Bibb, who assumed coverage at WR Hambrecht in April, a few months after the previous analyst, Bill Lennan, cut his earnings and revenue numbers and took his price target from $85 to $60, helping spark a decline in the stock.

Bibb took over for Lennan with a buy rating and a decidedly cheery note in which he compared Overstock.com CEO Patrick Byrne to Olympic Ski Champion Bode Miller. I am not making that up.

Bibb further ingratiated himself with Overstock by writing that “Management is taking a dynamic approach to finding the efficient frontier of growth and profitability…,” precisely the kind of Wall Street lingo that makes sense only if you start your day sniffing glue."

He mis-read a derisive warning to investors and suggested that it was compliment. It is hard to believe that anyone charged with managing the money of others could be so stupid. I thought I successfuly thread a needle as I tried to simulatnaeously warn investors, keep my bosses and Byrne happy and still be truthful. No doubt Byrne, a maverick, viewed the comparison to Miller, a famous maverick, as a compliment. It wasn’t. For the record, Bode Miller is not an “Olympic Ski Champion.” He wrecked.

From Wikipedia:

Despite the hype surrounding Miller in the weeks prior to the 2006 Winter Olympics, every one of Miller's five medal bids in the Turin Games fell short: he finished a disappointing 5th in the Downhill, was disqualified – while in first place at the time – during the second leg of the Combined event, received a DNF (Did Not Finish) in the Super G, tied for 6th in the Giant Slalom, and claimed another DNF after missing a gate in the Slalom.

Miller did get two silver medals back in 2002.

The Matthews insult lives on, available to all on the internet while the report he misrepresented is only available to particularly diligent First Call subscribers interested enough to do an advanced search (No one, in other words). Since the insult has not gone away, I felt compelled to set the record straight even if no one cares but me (I concede that is likely the case).

To further straighten things out, when I wrote “Management is taking a dynamic approach to finding the efficient frontier of growth and profitability” I thought I had found a way to say “management is using trial and error since it does not yet know how to balance growth and profitability” without infuriating management. Perhaps if Mr. Matthews had started his day in his usual manner he would have gotten the point. I doubt many real clients needed anything other than their morning cup of Starbucks.

Starbucks: Analyst Recommends Aggressive Buying On Overdone Investor Disappointment

Holy Cow! An analyst from Odlum Brown said buy..close the market so we can sort out such a momentous event. Was that "THE" Odlum Brown.