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SHORT INTEREST UPDATE

Looking at recent short interest moves in the restaurant space, it is interesting to note the increase in casual dining short interest versus quick service.  Below I go through some important takeaways:

  • CAKE is seeing short interest increase dramatically.  This company has an average check problem and the prospect of rising meat and dairy costs obviously doesn’t help the company’s outlook.
  • PFCB, despite a marginal uptick over the past two weeks, has seen short interest come down significantly of late.
  • CHUX is the perennial under-performer and the shorts piled into this ahead of the most recently reported quarter.
  • MCD remains the Teflon Don of the restaurant space – this will change in 2011.
  • CMG short interest remains low but ultimately the tide will reverse.  Labor cost efficiency, part of the secret sauce that footed the bill for organic, spot market, Food With Integrity, are going higher.  There is complacency here and I anticipate a change here when the music stops.
  • SBUX and PEET saw short interest rise while GMCR ticked down.  I believe that the PEET shorts are playing with fire here and GMCR is a much more attractive target on the short side.

SHORT INTEREST UPDATE - short interest historical 210

Howard Penney

Managing Director