Brian T. Moynihan CEO Bank of America Corp. on Comsumer spending
The strength of the labor market has, for the most part, been surprising to the upside, driven by the Restaurant Industry. As of the April jobs report, the restaurant industry posted the 28th consecutive month of payroll expansion, with the addition of more than 2.5 million jobs during that period ranked as the economy's top job creator. The professional and business services sector was the next closest industry, adding 2.2 million jobs since February 2021. And while that may be good news for workers, it's not what the Federal Reserve wants. Fed Chair Jerome Powell has emphasized that the labor market remains unsustainably tight, and supply and demand need to get into better balance for inflation to retreat toward the Fed's 2% goal.
Question: "As always, start off by asking you your views on the macro; you know, this time last year, we were talking about whether the Fed will be able to tighten and also engineer a soft landing while killing inflation. A year later, we fight 500 basis points inflation still high, maybe coming down, and unemployment remains very low. How do you size up the Fed's task from here? How much has been done? What needs to be done, and what is your outlook for the macro in general?"
Response BAC CEO - "You know, wage growth is still slowing, and employment and new claims are up slightly. You're seeing it start to come through the system and things like spending at restaurants, which creates a lot of employment because it takes a lot of people to run a restaurant. It's down to 3% year-over-year growth versus 17% three or four months ago. So I think they've won the war."
The 3% he referenced is a better number than Knapp Track in April of 0.6% and Black Box at 1.3%, but the BAC CEO implies that the slowdown in restaurant sales will hurt job growth in the economy's top job creator. That slowdown is showing up in the JOLTS data.
PLAY EARNINGS NEXT WEEK
PLAY is a BEST IDEA SHORT and is scheduled to report earnings on June 6th AMC, and street estimates are for FY1Q24 SSS of -1.5% improving sequentially over the year's balance.
Since the beginning of the year, PLAY's revenue estimates are flat, while EBITDA has declined (-1%) and EPS is down (-7%). Since the beginning of the year, Industry sales have softened, and PLAY traffic, as measured by Placer, has softened significantly since January. The street estimates for January FY24 of 18.6% revenue growth look aggressive. The street has +1% same-store sales growth for FY24 and average store growth of 14%, suggesting that FY24 revenue growth should be closer to 14-15%, and which translates into 14% EPS growth. Given current trends, SSS could be down LSD to MSD in FY24, and negative leverage to the business model could be significant. Short interest is up less than 1% over the last three months
