MCD SEES A SLOWDOWN COMING
MCD is one of the most "MACRO AWARE" companies we follow. As the CEO said on the last earnings call in late October "As I’ve said before, our base case scenario going forward is that we expect to experience a mild to moderate recession in the US and one that will be potentially a little deeper and longer in Europe."
Now, the company is preparing for that reality. Last Friday, MCD" CEO said, “some difficult discussions and decisions ahead,” as the company will evaluate roles and staffing levels as part of a broad organizational restructuring designed to increase the business's speed, innovation, and efficiency. The “Accelerating the Organization” effort will include discussions among leaders throughout the company, with the strategy slated to be finalized in April. “As part of this work, we will evaluate roles and staffing levels in parts of the organization and there will be difficult discussions and decisions ahead,” Kempczinski wrote in a system message on Friday. “We will look to our strategy and our values to guide how we reach those decisions and support every impacted member of the company.”
Small data point
Kura Sushi USA (KRUS) stock slid over 20% on Friday after posting disappointing earnings results on Thursday evening.
The California-based sushi chain posted a $0.21 per share loss, $0.03 below the bar set by Wall Street and narrowly missing revenue expectations. The company say significant margin pressure despite SSS increasing 6.9% from the prior year, slowing from 27.6% in 4Q22. Although, The traffic trends left CEO Hajime Uba still optimistic. “I’m excited to report another strong quarter where we outperformed industry averages with regards to traffic growth, saw two strong restaurant openings, and delivered restaurant-level operating profit margin that exceeded the same period prior to the pandemic,” he said. “In an environment where consumers are forced to be more careful with their discretionary spending, we’re delighted to see that when our guests go out to eat, they choose to dine with us.” For the full year, the chain reaffirmed previously provided annual guidance that projected total sales between $183M and $188M, in line with the $185.46M consensus.
EARLY ICR PRESS RELEASES
FWRG reports preliminary 4Q22 operational metrics of SSS of +7.7% vs. consensus of 9.5% and traffic growth -0.6%. The company said, "Hurricane Ian forced temporary closures of First Watch restaurants in Florida, South Carolina, and Georgia and had a negative impact of at least (0.7%) on both same-restaurant sales growth and same-restaurant traffic growth in Q4.
TAST reports preliminary 4Q22 revenue of $445.1M vs. FactSet's $433.2M and SSS for the company's Burger King restaurants +6.2% vs. 4.9% in 3Q22 and SSS sales for the company's Popeyes restaurants +9.2% vs. 6.5% in 3Q22.
Management comments:
- "We are encouraged by our sequential top-line improvement with preliminary revenue growth of 7.0% in the fourth quarter of 2022 compared to the fourth quarter of 2021, primarily driven by 6.2% comparable sales growth at our Burger King restaurants.
- "As we lapped tougher comparisons in November and December, we saw continued benefit from reduced discounting with limited discernible impact on our traffic.
- "From a cost perspective, inflation continued to impact our business during the fourth quarter with labor inflation in line with our expectations and commodities remaining elevated from a historical perspective, though both are continuing to see moderation from levels experienced earlier in the year."
PFGC reports preliminary 2Q23 revenue of $13.9B vs. FactSet's $13.88B. and 2Q23 Guidance of (A) EBITDA to be at least $290M vs. prior guidance of $260-280M and FactSet $277.8M
The company beat 2Q estimates but did not raise FY23 guidance (Jun 2023):
- Reaffirms revenue $57-59B vs FactSet $58.06B
- Adjusted EBITDA $1.25-1.35B vs prior guidance $1.23-1.33B and FactSet $1.30B
RRGB reports certain preliminary 4Q22 results that are a disaster and announced 5 point plan to drive shareholder value (lol). In an incredibly insane move, the company is now going to increase leverage by announcing a potential sale/leaseback transaction. A WTF moment for the new CEO
- Revenue ~$290.2M vs FactSet $295.5M [3 est, $292.6-300.3M]
- Comps +2.5%, which includes a benefit of ~$2.8M due to the company's assessment of breakage related to its Red Robin Royalty program.
- Excluding this benefit, comparable restaurant revenue would have been +1.5% vs consensus +4.8%
- Transform to an operations-focused restaurant company:
- Empower decision-making by Operators at the unit level
- Incent and reward Operators to drive business growth and results
- Restructured support organization
- Elevate the guest experience:
- Invest in People, food quality, and the restaurant facility
- New cooking platform to fully deliver on our commitment to Gourmet Burgers
- Menu refresh adding a variety of both offerings and price points
- Remove costs and complexity:
- Optimize the supply chain to reduce costs and ensure consistent delivery of the high-quality product
- Evaluate vendors for need, performance, and competitive costs
- Implement an ongoing process to reduce costs through actions that uphold our commitment to a great guest experience
- Optimize guest engagement:
- Engage with and support the local communities in which we operate
- Enhance the off-premise experience
- Further, build and engage with guests through the Red Robin Royalty loyalty program
- Drive growth in comparable restaurant revenue & unit level profitability, and deliver financial commitments:
- Regain credibility with the investment community
- Drive performance in the existing base of restaurants, earning the right to resume new unit growth
- Deliver financial guidance commitments
