KNAPP TRACK: CASUAL DINING SNOW PLOWS

 

Conclusion: Knapp Track comparable restaurant sales in January indicate that the casual dining recovery has resumed.  Importantly, Knapp underlines value as a factor that will continue to be important.  As commodity pressure flows through to the P&L, concepts that lack pricing power will likely suffer as the 2011 scenario plays out.

 

Knapp Track preliminary results for January suggest that the casual dining recovery seen in the third quarter has recommenced in January.  January comparable restaurant sales of +0.6% signifies a sequential uptick in two-year average trends of 115 basis points.  Adjusting for bad weather, January’s number would have been +2.3%, which would imply a 150 basis point increase in two-year average trends (also adjusting December per the adjustment provided in last month’s Knapp Track report), excluding weather.  Q410 saw a sequential slowdown in comparable restaurant sales to +0.6% from +0.8% in 3Q10.  On a two-year average basis, however, quarterly comparable restaurant sales trends accelerated by more than 90 basis points sequentially.

 

Comparable guest counts in the casual dining space saw a sequential gain from a revised -1.8% result in December, according to the most recent Knapp Track report.  January’s preliminary decline of -1.5% shows that the “recovery” is far from secure, especially as companies look to pare back their use of discounting as a driver of traffic as commodity inflation accelerates.  On a two-year basis, January’s result implies a sequential acceleration of 100 basis points.

 

In this month’s report, Malcolm Knapp highlighted several interesting factors that he believes are critical to consumer behavior.  Firstly, the effects of the financial crisis persist with mortgage defaults and high levels of unemployment burdening attitudes.  Another interesting point he makes is that value (quality of the value proposition and the efficacy of the messaging) remains a key driver of traffic.  Value is relative.  The casual dining brands that can “take the pain” and absorb commodity cost increases, either by further margin gains in other areas of the P&L or by prudent hedging, will likely outperform those that have to implement price gains that make their service less affordable.

 

 

Howard Penney

Managing Director


Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more