Restaurant industry Traffic
Casual dining saw a significant improvement in traffic WoW from (-13.4%) to +2.5%. This brings May's decline to (-5.5%) from (-7.3%) in April.
Quick Service saw a significant deceleration in traffic WoW from (-1.3%) to (6.8%). This brings May's decline to (-4.1%) from (-3.1%) in April.
Removing BOWL from the SHORT bias
Not enough red flags
We added BOWL to the short bias list toward the end of 2022 on concerns of the cycle, which has not changed. The company reported a strong quarter and the cycle is not likely to hut most consumer propensity to bowl. Its also not enough to offset positive fundamental set up of strong SSS and acquisition pipeline. They are lookin at adding 25-30 new centers over the next 12 months on a base of 329 centers.
FAST Casual Headwind
Hedgeye Marco estimates that Roughly 2/3 of Real PCE Growth over the past year has been attributable to the pause on Student Loan Payments, which expire in ~12 weeks. We Are Looking at a ~1.5% growth headwind to Real PCE come September 2023.
According to recent data from The NPD Group, older Gen Z customers (18 to 24 years old) are more inclined to pick fast casual, quick-service restaurants than older cohorts. Their discovered that, of the 5 billion restaurant trips made by Gen Z customers between July 2021 and July 2022, 4.3 billion of those visits were to quick-service restaurants. Price and perceived value seem to be the primary determinants of Gen Z's restaurant preferences because there are more interests vying for their dollars than there were for any earlier generation. Value pricing points have become incredibly crucial when deciding which items to buy, according to the study's Gen Z participants, who reported that increasing menu prices have impacted their visits to restaurants. In terms of marketing and menu offerings, Gen Zs favor chains that specifically appeal to their interests in sustainability and plant-based or organic foods. Compared to consumers over 25, Gen Zers look for organic products on menus at a rate of over 18%, and they prefer sustainably derived foods at a rate of 16% as opposed to 11% for older demographics. The NPD data demonstrates Gen Z's particularly elevated interest in sustainability, which is consistent with recent research from the International Food Information Council. CMG menu innovation in 2023 will consist of one to two LTOs gear towards its 33 million Rewards members many of whom are Gen Z. Chicken Al Pastor has been rolled out they also recently launched a new lineup of Lifestyle Bowls that cater to contemporary wellness habits of Gen Z and millennials. On the last call they specifically mentioned "We also continue to leverage social media to remain relevant with our consumers, especially Gen Z. This year we surpassed 2mm TikTok followers which, to put into context, rivals some of the largest brands in the world, and we were the first brand to launch on the new social media platform, BeReal"
