Industry Traffic
Restaurant industry traffic continued to improve in the last week of June
- QSR turned positive in the last week +2.1% bring the month to (-1.5) versus (-4.9%) in May
- Casual dining also improved WoW to (-1.8%) bringing the month to (-3.8%) versus (-5.5%) in May
Topgolf Callaway Brands Corp (MODG)
Adding to Short Bias List. Co-Covering with Hedgeye Retail Sector Head Brian McGough.
Brian has bearish outlook on GOLF (almost pure play on golf balls/equipment), since late 2022. The risk of peak golf season also applies to MODG's equipment division, which accounts for 35% of revenue but 60% of trailing EBIT. The narrative over the past few years has focused on all the new golfers who have joined the game since Covid's launch, but according to NGF data, golf membership has increased by merely 5% overall over the last three years (not CAGR). The number of rounds is risen by around 10%, while MODG equipment is up by about 45%. We predict that over the next 12 months, demand for long-lasting golf equipment goods including clubs, footwear, and gear will significantly decline. We understand that there is a unit growth story for Top Golf, but the RFID-enabled core ranges demand a significant amount of expenditure and reinvestment. As units ramp up, we also believe that early locations may be losing their novelty, which would put pressure on growth. In the end, this is an immersive restaurant concept, which is typically more cyclical. Expect demand risk in the second quarter and beyond as consumer spending continues to suffer. The bearish bias is consistent with our call Dave & Buster's. As you can see from the traffic trends below all three concepts Dave & Busters, Main Event and Top Golf are are experiencing slowing traffic with Top Golf outperforming the other two.
- Underperforming the sector 2Q23 traffic for Dave & Busters slowed to (-12.2%) from +1.8%. As a reminder PLAY reported 1Q23 SSS of (-4.1%) with Amusement SSS (-7.0%).
- Underperforming the sector 2Q23 traffic for Main Event slowed to (-18.6%) from (-3.1%).
- Outperforming the sector 2Q23 traffic for Top Golf slowed to +1.6% from +16.2%.
Asa subsector of the Restaurant industry, in 2Q23 Experiential Dining traffic declined (-6.3%) from +7.3% in 1Q23.
Pushing back on NYC
DASH, UBER and JTKWY (Grubhub) filed a lawsuit against New York City on Thursday in an attempt to block a new law that sets minimum wages for food-delivery workers.
The legal action was fired off ahead of a law due to go into effect on July 12 that requires online delivery companies to either pay workers around $0.50 for every minute they spend on a trip or a minimum of $17.96 per hour for the time they spend active on each app. Both those pay scales would exclude any tips earned. The current system is that workers are paid a rate per trip that is set by each app. The companies claimed the new law establishes a minimum wage higher than other industries and is flawed in the arrangement could lead to multiple apps paying a worker for the same hours. DASH issued a statement on Thursday with an explanation that it joined industry peers in filing litigation against the City of New York to send a "clear and unmistakable message" that bad policies cannot go unchallenged.
