TALES OF THE TAPE: CKE, SBUX, SONC, MCD, CMG, MCD, BWLD, DRI, CBRL

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

MACRO

Crop conditions don’t seem to be improving in the U.S.  The States is the biggest exporter of corn and soybeans.  U.S. corn was rated 68% good or excellent as of June 26, down from 73% a year earlier.  65% of soybeans earned the good or excellent designation, down from 67% a year ago, according to USDA data. 

The federal government’s Energy Independence and Security Act has created inelasticity in corn markets.  Supply shocks are tending to push prices higher than they might be in a typical supply/demand system, according to an energy policy specialist quoted by cattlenetwork.com.

QUICK SERVICE

  • CKE reports a net loss of $2.6 million for the quarter ended May 23rd.  However, company-owned comparable restaurant sales growth was a positive; Hardee’s comps were up 9.6% - the best result in seven years – and Carl’s Jr. comps increased 2.1%. 
  • SBUX is paving the way for mainstream mobile payments, according to tech blog Mashable.  Starbucks allows customers at 9,000 of its locations to pay with their Android, Blackberry or iPhone phones.
  • SONC will serve wine and beer at a new Miami location, making it the first Sonic restaurant to do so.  A spokesperson for Sonic said that the company wishes to increase evening traffic and take advantage of the evening weather in Florida.
  • MCD should dump its “Café con Leche” beverage, announced yesterday, according to a writer at the Miami News Times.  One of the paper’s online blog calls the offering “what just might be one of the most derogatory forms of flattery I have ever seen”.
  • CMG climbed to an all-time high during yesterday’s trading session.
  • MCD climbed to an all-time high during yesterday’s trading session.

CASUAL DINING

  • DRI was reiterated Buy by Stern Agee, price target is $55.
  • CBRL management said yesterday that home prices and unemployment are a drag on the industry.  Food and gas prices can be added to the list!
  • BWLD climbed to an all-time high during yesterday’s trading session.

TALES OF THE TAPE: CKE, SBUX, SONC, MCD, CMG, MCD, BWLD, DRI, CBRL - stocks 629

Howard Penney

Managing Director