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Retail Sales and Use Tax receipts data from California does not paint a pretty picture for restaurants with a high level of exposure to the Golden State.

California is in the news today as home sales hit their lowest level since January 2008.  The high low society is not merely confined to the east coast – sales of luxury homes rose for the first time in five years during 2010, according to DataQuick Information Systems in San Diego.  A bearish housing market is bad for consumers, of course, and Hedgeye’s view remains bearish on housing on a national basis. 

Looking at tax receipts data, however, provides a very interesting insight into how the consumer is faring in California.  It is clear from the three charts below that California-centric restaurants are facing a possible downtick in comps, if Retail Sales and Use tax receipts trends remain on their current trajectory.  Furthermore, it seems that management teams are aware of this.  The quotes below outline management commentary on California from the most recent earnings transcripts for CAKE, CPKI and PFCB.  As you will read, there is a certain degree of hesitancy to discuss the Golden State. 

CAKE:

Q: Can you give us an update on California?

A: Well, California in the fourth quarter was – first of all, we saw strength in key geographies like Texas and the Midwest and Florida and the Southeast. But the impact of – it's hard to measure California in the fourth quarter because we had a period of time where it rained non-stop for like nine days in a row.

CPKI:

During the most recent conference call, commentary on California trends was conspicuously absent!

PFCB (from call today):


Where we saw weather, we saw negative comps.  California went back to negative because of this. 

CALIFORNIA CLIFF-HANGERS - cake swandive

 

CALIFORNIA CLIFF-HANGERS - pfcb swandive

 

CALIFORNIA CLIFF-HANGERS - cpki swandive

 

Howard Penney

Managing Director