Yesterday, government data showed that real spending slipped in January as rising prices and bad weather discouraged spending on nondurable goods.
In aggregate, spending on durable goods increased more slowly and “real spending” was reduced across the major types of discretionary services. Importantly, real expenditures on “food served at restaurants and hotel accommodations” declined by 0.6%, which was the sharpest drop among all categories of service.
The consumer is better off today than in January 2010, but as the January data showed, spending remains sluggish. Also, increasing food and energy prices create further risk, particularly on discretionary items. In 2010, DPZ did an amazing job transforming the business in the USA, but the suggestion that DPZ is going to go on a 4-5 year run like MCD is very unlikely. In fact, DPZ is likely to report negative same-store sales growth in 1Q11.
Howard Penney
Managing Director