BROS - Not ready for prime time
Moving to the best Idea, SHORT and we will be hosting a call on Monday, 02/27/23, @ 12:30PM to discuss our thoughts.
CALL DETAILS:
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BROS reported 4Q23 Revenue of $201.8M vs. FactSet's $196.4M and (A)EBITDA of $29.8M vs. FactSet's $28.7M and Comps were as reported (0.6%). The FY23 is symbolic of the company that does not have control over its costs with Revenue $950M-1B vs FactSet $981.1M (A)EBITDA $125M vs FactSet $142.1M with Comps up low single digits vs FactSet 2.0%. Given a significant decline in traffic, BROS cant take price and has said, "at this point, BROS has no plans to take additional menu pricing in 2023; expects low-single digits growth from pricing to roll over into 2023 from menu pricing taken in 2022. In 2023, capital expenditures will grow significantly to $225-250M in 2023 are expected to be at least 150, of which at least 130 shops will be company-operated spending, Including ~$15M to $20M for a new roasting facility projected to open in 2024.
The upcoming SHORT call will focus on the following:
WING - Strong performance
Moving from BEST IDEA LONG to a LONG bias.
We added WING to the LONG list last summer as wing deflation became apparent and now the company is reaping the benefits of improving margins and accelerating traffic. WING reported 4Q22 Non-GAAP EPS of $0.60, which beat consensus by $0.19, and revenue of $104.9M (+45.6% Y/Y) which beats by $3.9MM. The company is reaffirming its three to five-year outlook of mid-single-digit domestic same-store sales growth. Same-store sales of company-owned +2.6% vs. FactSet +4.5% and System-wide domestic +8.7% vs. FS +6.0%. Cost of sales 75.8% vs. year-ago 83.3%; Restaurant margin 23.6% vs. year-ago 15.3%; EBITDA margin 33.1% vs year-ago 28.1%.
DPZ - Weak Performance
Removing from the BEST IDEA LONG.
DPZ reported disappointing SSS of +0.9% vs. FactSet +3.4%; Company +3.4% vs. FS +3.0%; Franchise +0.8% vs. FS +3.8% and International +2.6% vs. FS +3.4%. This performance is leading the company to revise its 2/3 Year Outlook, with the lower end likely for the foreseeable future. "Given the current macro-economic headwinds that are impacting the company's U.S. delivery business in particular, the company is updating its two-to-three-year outlook from 6-10% global retail sales growth, excluding foreign currency impact to 4-8% global retail sales growth, excluding FX and global net unit growth from 6-8% to 5-7%."
The company expects results for FY23 to come in toward the low end of the ranges for both metrics.
