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Conclusion: Knapp Track comparable restaurant sales in February indicate that the casual dining recovery is slowly progressing.  However, a sizeable downside revision of January’s number from +0.6% to -0.1% is concerning.  Another factor that has been receiving a lot of attention is highlighted by Knapp in his report; gas prices have advanced to over $3.50 per gallon at a brisk pace.

Knapp Track preliminary results for February suggest that the casual dining recover, which took a pause of sorts in the fourth quarter, may be back in place.  February comparable restaurant sales of +1.6% signifies a sequential uptick in two-year average trends of 95 basis points.  The revision in January’s trends means that the sequential uptick in two-year average trends in January was 80 basis points.  Q4 saw a sequential slowdown in comparable restaurant sales to +0.6% from +0.8% in 3Q10.  At present, 1Q to-date is tracking at +0.8%, almost 100 basis points above those seen in 4Q on a two-year average basis.

Comparable guest counts in the casual dining space saw a sequential gain from a revised -2.2% result in January.  February’s preliminary decline of -0.4% shows that the recovery is far from secure, especially as gas prices continue to gain and discourage discretionary travel by automobile.   Additionally, an inevitable raising of prices from here could slow any further acceleration in comps.  On a two-year basis, February’s result implies a sequential acceleration in guest counts of approximately 60 basis points.  

We continue to favor EAT and PFCB.

Howard Penney

Managing Director