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Notable news items and price action from the restaurant space as well as our fundamental view on select names.

MACRO

“Deflating the Inflation” - U.S. wheat futures closed at a six-and-a-half-month low Monday as the advancing harvest increased inventories of the grain.

With corn planting now complete, 97% of corn in the top 18 producing states has emerged according to the USDA’s latest Crop Progress report released June 20.  70% of crops were in “good” to “excellent” condition, compared to 69% last week and 75% last year.

QUICK SERVICE

  • MCD UK say the introduction of Wraps  is the biggest introduction to its permanent menu in four years and says it has made more changes to its menu in four years than in the previous 30. The range includes a Grilled Chicken Salad Wrap and a Sweet Chilli Crispy Chicken Wrap, and has been packaged to make them easy to eat on the move. McDonald’s is also running a wrap of the day promotion offering one wrap at £1.99.

Hedgeye: Globally, MCD continues to try to build sales around the shoulder periods of lunch. 

FULL SERVICE

  • BWLD - Buffalo Wild Wings has pledged that if the players and owners compromise on their differences and come to an agreement to return to the field by July 20 - the first day players are scheduled to report to training camp - everyone who signs the "Save Our Season" petition will be awarded six free wings to be redeemed when the return of professional football is celebrated in September. 

Hedgeye:  I like this promotion, but it also tells you that sales trends without football are not going to be good. 

 

  • DRI - Interesting call out of Wells Fargo; Darden Restaurants estimates increased.  “Firm cites the new Seafood Feast promotion at Red Lobster and raises FQ1 and F12 estimates.”  As I wrote a few weeks back, the $15 price point at RL is an “extreme” discounting for that brand. 

Hedgeye: I know the SSS have accelerated, but the question remains about consumer preference for the promotion, especially given the double digit inflation the company is experiencing in seafood.

 

  • CBRL: Right when the company faces pressure from an activist investor CBRL names Coleman Peterson, apparently known as “America’s Top People Person,” to their Board of Directors. Previous executive experience includes time as the chief human resources officer for Wal-Mart Stores, Inc. 

Hedgeye: Maybe an indication the Mr. Woodhouse is just ignoring the thorn in his side.

 

  • DIN plans to expand IHOP to the Middle East.
  • TXRH gained on accelerating volume while PFCB and RUTH declined on accelerating volume. 

TALES OF THE TAPE: MCD, BWLD, DRI, CBRL, DIN, TXRH, PFCB, RUTH - stocks 621

Howard Penney

Managing Director