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

MACRO

Persisting drought conditions in the southern Great Plains states are making it likely that the rebuilding of the United States’ cow herd will take four years or more. 

Wheat has continued to slide and could, once June is completed, be at the end of the biggest monthly slump since 2008 as harvesting accelerated thanks to the warm, dry weather.  According to the U.S. Department of Agriculture, approximately 44% of the winter crop was harvested as of yesterday, ahead of the five-year average of 37%. 

Restaurants have seen declining guest visits for evening meals for three years but that is now changing, according to new findings from the NPD group.  Food inflation for groceries is said to have narrowed the gap between away-from-home and in-home dining costs.  See the chart, below, for a longer term perspective of Food-at-home CPI versus Food-away-from-home

CPI.

TALES OF THE TAPE - cpi home away from home

QUICK SERVICE

  • MCD is to start serving Café con Leche drinks in South Florida, targeting the large Latino population.
  • CBOU continues to outperform.  The stock has gained 27% over the past month.
  • SONC declined on accelerating volume.  We are negative on this name.

CASUAL DINING

  • KONA, one of our favorite names in casual dining, traded up 9.3% yesterday.  Please refer to our prior notes on this.
  • RUTH and BWLD gained on accelerating volume yesterday.
  • MRT declined on accelerating volume.

TALES OF THE TAPE - stocks 628

Howard Penney

Managing Director