Download Report for Free February 2013 Wrap-Up
- Stock performance: Restaurant industry stocks continue to perform well with the RR average up +2.5% in February and +8.8% YTD vs. +0.8% and +6.2%, respectively, for the S&P 500. Surprisingly, sit-down restaurant stocks (casual and family) performed the best despite Darden's (segment leader) reported sales weakness. We believe this reflects a knee-jerk rotation out of QSR with heavy exposure to China (given all the bad press there) into domestic brands (primarily casual and family).
- Macro: The economic backdrop for the restaurant industry remains unfavorable as represented by higher gas prices, y/y decline in consumer confidence and continued commodity cost pressures. Longer-term pressure represented by healthcare and mention of a national minimum wage hike also threatens profits.
- Sales Trends for $1B+ Chains: 2012 comp growth of +3.1% y/y (the strongest performance since 2005) suggests to us that the recession has sharpened the industry's focus. Many companies reporting 4Q12 financial results mentioned a very difficult sales environment during January and February because of an increase in payroll taxes and delayed tax refund checks. Fortunately, most expect a sales rebound from these pressures as the year progresses.
- Industry Traffic: DelaGet's data reveals sit-down outperformed QSR during February (mirroring stock performance), although traffic for both segments remain under pressure due to payroll tax headwinds.
- Real Estate: According to Marcus & Millichap's Nisbet Group, compressing cap rates prompt chain restaurant real estate investors to broaden their search of triple net inventory beyond core markets.
- Strategy: John Gordon of Pacific Management Consulting Group suggests that chain restaurants will benefit from exploring more granular menu pricing strategies.
Contact Phil Mangieri at (203) 938-4703 or pmangieri@ChainRestaurantData.com with questions or comments.
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