On The Back of California - BJRI, CAKE
BJRI is trading higher in post-market hours after reporting a beat on the top and bottom-line estimates and re-establishing its unit growth strategy.
In March, KNAPP Track showed surprising strength, with same-store sales up 8.1% on a 40% growth in California. BJRI has 29% of its restaurants in California! We are tactically removing CAKE from the BEST Idea Shortlist given it has 17% of its restaurants in California.
MARCH 2022 CASUAL DINING ESTIMATES USING THE COMPARISON 2022 VS. 2021.
COMPARABLE SALES COMPARABLE GUEST COUNTS
USA 8.1% 2.0%
CALIFORNIA 40.0% 27.1%
TEXAS 0.4% -4.9%
FLORIDA 10.3% 4.9%
BJRI reports 1Q22 EPS of $0.06 ahead of FactSet ($0.26) and and comps +33.9% beating FactSet +31.5%. Not surprisingly, the restaurant margin missed by (40bps) with the cost of sales shockingly (20bps) lower than expected. Weekly restaurant sales increased from $96,000 in January to $110,000 in February and $118,000 in March as the company opened more of its dining rooms. Compared to 2019, comparable restaurant sales declined -6.4% in January, during the peak of the Omicron impact, too -0.6% in February and 1.2% in March. Given the strength in California, the momentum has continued into April, with period-to-date weekly restaurant sales averaging $118,000, which equates to mid-single-digit positive comparable restaurant sales during the same 2019 period.
In 2022, BJRI will be increasing capital pending, G&A, and other growth-related training costs putting pressure on margins as sales slow.
Staying SHORT BJRI.
PETA Helps MCD
This is a funny story on Bloomberg about the sales of McPlant.
BYND is a SHORT, and MCD is a LONG
"McDonald’s Sales of Its Plant-Based Burger Get a Boost From PETA Stunt" So PETA wanted to boost McPlant sales to reduce demand for meat. McPlant was a bomb, even with bulk purchases from PETA. You can't make this yup!
Bad for BYND and good for MCD!
The CMG Bull Case
CMG is to report earnings on April 26.
CMG is a SHORT
The rosy outlook for CMG goes something like this: Sales are slowing, but the recent pricing actions can lead to an upward bias to our 2022-2023 earnings estimates? The risks to the downside are supply chain concerns, competition, food inflation, and the multiple compression on growth stocks as rates move higher. The spike in avocado prices could have an adverse impact on the upcoming earnings results, as incremental pricing was added at the end of the quarter.
