We are removing RRGB from the SHORT list. The company's future is bleak, but with a market cap of $100MM, there are better places to focus our time.
DASH
"...our Q4 outlook anticipates a consumer spending environment that is consistent with recent months...We caution investors that consumer spending could deteriorate faster or to a greater degree than we anticipate."
Total Orders increased 27% YoY to 439 million in 3Q22 from 347 million in 3Q21, driven by 15.9% YoY growth in DoorDash orders but declined -2.9% QoQ for the first time since coming public. The new verticals, convenience, and grocery business grew 80% year-on-year, and the US third-party grocery business grew over 100% YoY. With significant growth coming from new verticals, what was the growth in the core restaurant business to get to the 15.9% total order growth? With the stock down 68% YTD, the company was forced to reveal more about the restaurant business's profitability but stopped revealing enough relevant data. What was the Restaurant segment order growth?
When asked about the current macro environment, the company said, "Historically, in the last 60 years in that timeframe, only two of the last 60 years have we seen a decline in food spending in the US, and that's specifically in the restaurant and grocery industries. And so, I think even though all of us are wondering how to quantify the macro headwinds, food is the most resilient category. I think historically that's shown to be true." That might be true, but what is also true is DASH has never experienced a recession. People need to eat, but they don't need DASH to eat a meal. The delivery component of eating out is close to 100% discretionary.
In Q3 2022, marketplace GOV increased 30% YoY to $13.5 billion from $10.4 billion in 3Q21, driven by 21% YoY growth in DoorDash Marketplace GOV, but declined -1,2% QoQ. In 3Q22 Adjusted EBITDA was flat YoY at $87MM, and GAAP EBIT was a loss of ($307MM) versus a loss of ($100) last year and a loss of ($273MM) in 2Q22. The company is guiding to 4Q22 Marketplace GOV to be in a range of $13.9 billion to $14.2 billion (up 21% at the low end), with 4Q22 Adjusted EBITDA expected to be in a range of $85 million to $120 million.
QSR
Comparable sales rose 9.1% during the quarter, led by a 10.3% gain for the Burger King chain vs. 8.8% consensus. Comparable sales rose 9.8% for the Tim Hortons chain vs. 8.0% consensus and were 3.1% higher for the Popeyes chain vs. 2.8% consensus. Digital sales increased 26% Y/Y to approximately $3.4B to rep about a third of system-wide sales. Net income was $530M vs. $329M a year ago. The improvement was primarily driven by income tax benefit in the current year compared to an income tax expense in the prior year, increases in segment income in the TH and PLK segments, the inclusion of FHS segment income, a favorable change from other operating expenses (income), net, and the non-recurrence of a loss on early extinguishment of debt. Those factors were partially offset by unfavorable FX movements, a decrease in BK segment income, an increase in share-based compensation and non-cash incentive compensation expense, an increase in Corporate restructuring and tax advisory fees, and an increase in interest expense, net. On the balance sheet, QSR had total debt of $13.4B, net debt of $12.5B, and net leverage was 5.2X at the end of the quarter.
SHAK
Nothing to see here other than a company that will never get to the stated margin targets.
Shake Shack posted comparable sales growth of 6.3% in Q3 to top the consensus mark of 5.2%. The desire to grow units aggressively contributed to posting an adjusted pro forma loss for the quarter, as they held the line with inflation headwinds. Food and paper costs fell to 30.9% of sales from 31.0% a year ago, while Labor costs dropped to 29.4% of sales vs. 31.1% a year ago. A Shack-level operating profit of $35.8M was reported, representing 16.3% of Shack sales.
SBUX
The ex-CEO declaring early evidence of success for the U.S. Reinvention seems a little premature.
SBUX reported global comparable store sales rose 7% during FQ4 to beat the consensus estimate of +4.1%. The average ticket was up 8% to offset a decline in transactions during the quarter. Total revenue was $8.41B, topping expectations by $90M. Comparable sales in North America increased 11% vs. +7.6% consensus, driven by a 10% increase in average tickets and comparable transactions were up 1%. Operating margin fell to 18.6% of sales in the region from 21.8% a year ago, with labor and input costs accelerating. International comparable sales fell 9% during the quarter, with China comparable store sales dropping 24%, driven by a 22% decline in transactions with COVID restrictions holding back traffic in key cities. Active membership in Starbucks Rewards in the U.S. rose 16% to 28.7M during the quarter. The company's consolidated non-GAAP operating margin fell sharply to 15.1% of sales from the 19.5% level a year ago but beat the consensus mark of 14.3%. The company opened 763 net new stores during the quarter, ending the period with a record 35,711 stores globally. CEO Howard Schultz pointed to accelerating demand for Starbucks coffee worldwide in FQ4 and throughout the year. "And our Q4 results demonstrate early evidence of the success of our U.S. Reinvention investments. Reinvention will touch and elevate every aspect of our Starbucks partner, customer, and store experiences, and ideally position Starbucks to deliver accelerated, sustainable, long-term, profitable growth and value creation beginning in 2023."
