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Conclusion: Knapp Track comparable restaurant sales trends in October indicate that the casual dining recovery remains intact.  As per our recent research on EAT (see yesterday's note "EAT - BADGE OF HONOR), we see Brinker as a way to play this trend.

The Knapp Track preliminary results for October suggest that the casual dining recovery seen in the third quarter has continued into 4Q.  October casual dining comparable-store sales came in at +1.6%, the strongest print since August 2007, and traffic declined 0.9%.  Trends have been improving sequentially for most of 2010.  On a two-year basis, October comparable-store sales declined 1.6%, which was a 105 basis point improvement versus the two-year trend in September.  In terms of comparable guest counts, on a two-year basis, October saw a 95 basis point improvement versus the two-year trend in September. 

Knapp highlighted the number of initial jobless claims trending down as being a positive for casual dining sales and I would agree with that. However, it is important to note that while the most recent report indicated a significant improvement, there is still some way to go before the four-week rolling average reaches the 375-400k range we are looking for before unemployment can begin to improve.

KNAPP TRACK: CASUAL DINING RECOVERY - initial claims

Howard Penney

Managing Director