Consumables Position Monitor Changes
On Friday, we are making several changes to our position monitors in Restaurants and Consumer Staples ahead of the Q3 earnings reports. The markets have endured one-quarter of Quad 4, and our Macro Team is calling for three more. The stocks of many companies have sold off indiscriminately in Quad 4. We see opportunities for several companies with an improving earnings outlook; at the same time, we still see further downside for other companies on the short side of our position monitor. Our changes reflect where we see the upside/downside in Quad 4. We still think it is too early to invest for what is on the other side of Quad 4.
In Restaurants, we believe several companies will see significant margin pressure from slowing sales trends and inflation. The Hedgeye Restaurants watch list is down 29% YTD, but earnings revisions have not yet begun to come down nearly enough. Some stocks are beginning to reflect the disappointing earnings, but others are bucking the trend. The next six months will be very challenging for the industry as sales continue to slow and inflation remains sticky. On the call, we will add/cover some shorts and broaden the list of potential names we want to buy in the next draft.
SYY Labor Problems
300 Local 653 members walked off the job at Sysco Boston late Friday, just days after Sysco members went on #strike in Syracuse, NY. Over the weekend, #Teamsters extended picket lines to Sysco Arizona, where >250 members are honoring the line!
FWRG
FWRG provides an update on restaurants impacted by Hurricane Ian, saying that due to the hurricane, 85 of First Watch's Company-owned restaurants closed for at least one business day. As of Monday, all but 10 of those restaurants have reopened. The remaining unopened restaurants are located primarily in the Ft. Myers and Naples markets, where damage assessments and restoration of utilities are pending. Believes fewer than 5 of its restaurants sustained any significant physical damage.
Casual Dining traffic trends were slowing in Florida before Hurricane Ian
