Industry Sales Trends (as of 3/19)
We are now starting to see the negative impact of the Regional Bank's turmoil on restaurant spending. The week following the March 10 SIVB blowup caused a significant slowdown in restaurant traffic.
Casual Dining
- Casual Dining traffic decelerated WoW to (-5.2%) from (-3.6%)
- March is now tracking down (-4.1%) from (-2.1%) in February.
Florida continues to underperform TX and CA.
Quick Service
- Quick Service traffic decelerated WoW to (-3.7%) from +3.5
- March is now tracking down (-0.8%) from +4.6% in February.
Darden
DRI is now guiding to same-restaurant sales growth of 6.5% to 7%, with total inflation of 7% to 7.5%, commodities inflation between 9.5% and 10%, and annual pricing of 6% to 6.5%. This outlook implies 4Q23 same-store sales between 3%-5% (diluted net EPS between $2.43 and $2.58). We are estimating a 4Q23 SSS of 2%. It's not out of the realm of possibility that 1Q24 SSS for DRI goes negative! We are staying SHORT DRI.
Moving SBUX Up the SHORT list
Filling the shoes of Howard Schultz is a tall order for someone just getting into the coffee business.
As the company explained at the analyst day in September 2022, the company has a lot of work to bring technology into the stores to help thru-put. All of this work is now on the back of the new CEO, Laxman Narasimhan. According to Howard Schultz, Laxman's qualifications to be the CEO are: he is a global citizen; a servant leader; somebody who has an innate understanding of the heart and conscience of the company; someone who has the entrepreneurial DNA in his blood; someone who could embrace the vision of Starbucks in his way. What is missing from his CV is any experience managing a global retail business and no experience in coffee. On March 20, SBUX announced that its new CEO Laxman Narasimhan had assumed the role today and will join the company's board of directors. Narasimhan was named incoming CEO on September 1, 2022, succeeding company founder and now former CEO Howard Schultz. Narasimhan joined the company as the incoming CEO on October 1, 2022, and was expected to assume the CEO role on April 1, 2023. The latest PR said, "Laxman's intensive immersion into the business and extensive experience as a proven brand builder, innovator, and operator have uniquely prepared him to lead Starbucks into its next growth phase." The early exit of Howard Schultz from the coffee chain he founded has not quieted labor disputes between baristas and executives at Starbucks Corporation; in fact, they are pushing the new CEO hard.
We are getting more confident that the transition to the NEW CEO will not be smooth. We will have more details in the coming days.
