RESTAURANT INSIGHTS | Monthly Digest Call, Black Box, Restaurant Traffic Thru (5/15), RRGB

Monthly Digest Call

EVENT DETAILS: Date & Time: Friday, May 26th, at 10 AM ET. Webcast & Slides: CLICK HERE (Refresh shortly before the call). Add To Your Calendar: CLICK HERE WE WILL EXPLORE THE FOLLOWING TOPICS: A fresh recap of long ideas. A fresh recap of short ideas. Go through casual dining trends.  A brief recap of important developments. Top client inbounds during the month. Top questions from client meetings. Noteworthy takeaways from management calls. Discuss the pushback and feedback from our recent Black Book calls. Discuss trends we are seeing in 2Q23. Discuss 1Q23 earnings.  Revisit changes to our Position Monitors. Provide updates on some of our best ideas. We will also take live questions but will keep our call's length to 30 minutes.

Black box better than Knapp

Like Knapp Track the broader measure of restaurant sales, Black Box continues to slow but at a lessor rate.

During April, Black Box experienced its softest sales growth since July 2022, making April the second-worst month in over two years. The industry is now contending with a harsher reality: sales growth is now weaker than it was at the end of 2022, with same-store sales growth of 1.3% in April, which represented a 1.9% drop MoM. By comparison, sales growth averaged 4.4% in 4Q22. While sales growth is down compared to late 2022, same-store traffic growth remains just slightly better than the average -3.7% recorded for the 4Q22. While all segments posting negative year-over-year same-store traffic during April; the best performing segment based on traffic growth during the month was quick service, followed by family dining, then fast casual. Average guest check grew by 4.8% YoY in April, down from 5.8% in March and a considerable drop from 9.1% in January 2023. 

Same-store traffic growth was -3.5% for the restaurant industry during April; this was a 0.9% acceleration from March’s, with average check down 1.0% MoM. The Data from Knapp Track show a 0.63% slowdown in check MoM and 3.1% MoM decline in traffic, suggesting declining traffic is the biggest contributor in the slowdown in sales.  

Restaurant Industry Traffic tends (Thru 5/15)

Traffic for the QSR segment improved 1% WoW to (-5.9%), bringing the May (to-date) decline of (-4.8%).    

Traffic for the Casual Dining Segment segment decelerated (-6.9%)% WoW to (-4.6%), bringing the May (to-date) decline of (-5.3%).    

Red Robin

RRGB continues to levitate; 2H23 will look very different with a meaningful slowdown is sales trends

RRGB 1Q22 Non-GAAP EPS of $0.25 beats by $0.82 and Revenue of $418M (+5.7% Y/Y) beats by $12.42M. Net loss of $3.1 million was unchanged compared to 2022. Income from operations was $4.3 million, or 1.0% of total revenues, compared to $4.4 million, or 1.1% of total revenues, in 2022. SSS were 8.6% (7.2% price ; 0.8% mix and 0.6% traffic outperforming Knapp traffic of (-0.3%).    

The company raised guidance but threw caution to the wind at the same time. The company said the new "guidance reflects our confidence to both accelerate investments in food and labor, while also increasing our adjusted EBITDA outlook. As we look to the balance of the year, comparable restaurant sales have remained positive and better than the industry benchmarks to start the second fiscal quarter." Yet in the same breath says "due to typical seasonal sales shifts and the accelerated investments, we expect second quarter restaurant level operating profit margin to take a step back from first quarter levels, then sequentially increase through the balance of the year, as cost savings achieve a full run rate" The company is lapping very difficult comps in 2Q23/3Q23 and is likely to see a significant slowdown in traffic during that time. To execute on a turnaround the company need to make incremental investments while sales are slowing. Suggesting it will be very hard to hit estimates in 2H23