QSR RAMPS UP VALUE PROMOTIONS
According to Restaurant Research's Monthly LTO Promotions Tracker, the QSR sector ramped-up value mix +8.7% to 52.8% in January (the highest level since January 2021) and cut the average promotional price point 3% to $5. While FSR value mix increased +0.4% to 30%, the average promotional price point jumped +9.6% to $10.62, reflecting that FSR restaurants are less able to absorb current inflationary pressures because of a lower store-level margin compared to QSR).
CMG is now giving away free Queso and represents the 2nd time we have noticed the company starting to promote free food!!
CMG Earnings
With the company running 15% pricing this quarter, CMG should beat the consensus SSS of 6.9%. We fully expect the company to reflect positively on the trends in 1Q23. This could help to offset the potential implications of negative traffic in 4Q22.
Heading into earnings, CMG has ripped 22% over the past month, with the company reporting EPS AMC. In the last four quarters, CMG % moves following earnings were: (7%), +15%, +3%, and +10%. The company has missed consensus revenue estimates over the past two quarters, SSS one of the last two, and EPS has not missed since 4Q20. Comps +6.9% vs. guidance up mid to high-single digits; Revenue $2.232B +13.8% (flat sequentially); COGS 29.9%; Restaurant margin 25.1% vs. 20.2% last year; EPS $8.91 vs. $5.51 up 59% from last year. The current consensus is for significant margin leverage in 2023, with sales of $9.8B, up 13.3% (SSS up 5.4% vs. 8.3% in 2022E), and EPS of $42.84, up 28.3%. The operating margin is estimated at 16% in 2023, up 210bps.
CAVA to go public?
Does this mean the return of Ron Shaich?
Cava has confidentially filed a draft registration statement on Form S-1 with the U.S. Securities and Exchange Commission for a proposed initial public offering of its common stock, the company announced Monday. Cava appears to be the first major restaurant company to file an IPO in 2023. Ron Shaich is the COB of Cava and since selling Panera, he’s turned his focus to investing in small restaurant start-ups via Act III Holdings. Act III has funded Mediterranean fast-casual chain Cava Group Inc., including supporting the company's takeover deal of Zoe's Kitchen, valued at $300 million. At the time CavaGroup, had 66 units, while Zoes Kitchen had 261 locations. According to a press release, the combined companies will have 327 restaurants in 24 states throughout the U.S.
