LONG China
From Keith's top three things today - 1 CHINA – it's all #timestamped so you can see that all I did on red in the morning was cover my US Shorts (XLK, AMZN, etc.) and buy-MORE of one of our Top New 2023 Asset Allocations on red (Long China via KWEB and EWH, which you could see me buying incrementally in the Macro Pro product in the morning); HongKong (EWH) was up big +2.4% last night and those two positions are now both in my Top 10 Allocations (and not many people ask me about them!)
Remember, we are LONG YUM and YUMC as ways to play long China. We are also SHORT SBUX, which has exposure to China.
Burrito SEASON?
CMG announced a plan to hire 15,000 new team members amid a rapid store expansion and the upcoming Burrito season! A quick search of 10 years of transcripts and the company has never mentioned a "burrito season" before! What is the driver of the uptick in sales from March to May?
CMG anticipates opening 255-285 restaurants in 2023, with at least 80% including a Chipotllane. Development delays remain a headwind, including equipment and construction material shortages, construction labor challenges, permitting, utilities, and inspection delays. This should persist into 2023 as the company moves toward the high end of its targeted 8%-10% openings once these headwinds subside. The company has made progress coming out of the COVID challenges, but labor challenges persist, and the inflationary wage environment is improving slightly. In today's press release, The company explained "that March to May is typically the busiest time of the year, a period it calls "burrito season." I did not know this was a potential factor driving sales beginning in March. On the 3Q22 earnings call, the company said, "Looking ahead to Q4, our current, comparable sales trends are choppy as we lap our Brisket LTO from last year, and we expect our October comps will likely end in the mid-single digit range. Assuming current sales trends continue, we expect our comps to be in the mid-to high-single-digit range for the full fourth quarter as Garlic Guajillo Steak will be in restaurants through the end of the quarter compared to Brisket, which ended in mid-November of last year. This is the first I have seen the company talk about seasonality in the business, and I'm assuming this is factored into the guidance, but there was no mention to this on the call. The biggest CMG challenge is hiring enough crew to account for turnover and new crew members to support Chipotle's aggressive unit growth plans. At the same time, inefficiencies accrue to the system as it promotes those current employees.
Restaurant Industry Traffic Trends
For the recent period ended 1/16/22, the Placer.AI data has Casual Dining slowing by 4.9% WoW, which QSR increased 1.5% WoW.
