Menu Prices
Since October 2022, we have seen a notable deceleration in the growth of menu prices in the U.S., with a more pronounced slowdown in grocery prices. This trend reflects a shift from the high inflation rates experienced earlier, particularly during the pandemic. The food-away-from-home sector shows varied growth rates across different segments, with limited-service menus experiencing higher price increases than full-service establishments. Regional differences also play a role, with the West and South seeing the most significant hikes in menu prices.
Key Points:
- Menu Price Increase: There was a 5.4% rise in menu prices over the last 12 months - this is the smallest increase since October 2021 and represents the seventh month of decelerating growth.
- Grocery Price Trends: Grocery prices saw a more pronounced slowdown, with only a 2.1% increase in the same period – the smallest 12-month gain since June 2021. This marks a significant shift from the previous year's double-digit gains, peaking at 13.5% in August 2022.
- Pandemic Period Comparison: Since the beginning of the pandemic (February 2020 to October 2023), grocery store prices have increased by 25%, slightly outpacing the 24% rise in menu prices.
- Overall Consumer Prices: The overall consumer price increase was 3.2% between October 2022 and October 2023, slowing of late. The core CPI, excluding food and energy, rose by 4.0%, the smallest increase since September 2021.
- Food-Away-From-Home Sector: Limited-service menu prices (+6.2%) grew faster than full-service menu prices (+4.3%). The increase in limited-service prices is down from an 8.2% peak in April 2023. The West and South regions experienced the highest menu price increases (5.7%), while the Northeast (5.1%) and Midwest (4.6%) saw below-average rises.
Revolutionizing Retail: How Walgreens is Redefining Shopping with Hybrid Stores and Speedy Deliveries
Walgreens Boots Alliance is embracing a forward-thinking approach in the retail sector, leveraging its extensive network of over 8,700 physical stores to enhance the efficiency of online order deliveries and boost sales. This is good news for DASH. Here are the summary thoughts from yesterday's press release:
Strategic Utilization of Physical Stores for Online Efficiency: A key theme in Walgreens Boots Alliance's strategy is the innovative use of its extensive network of physical stores to enhance the efficiency of online order deliveries. By closing a dedicated e-commerce warehouse and transforming its 8,700 stores into dual-purpose facilities, Walgreens serves customers in-store and uses these locations as local distribution hubs for online orders. This approach significantly shifts from traditional retail models, reflecting a blend of physical and digital retail strategies to meet evolving consumer demands.
Adaptation to Consumer Behavior and Market Trends: Walgreens' strategy is heavily influenced by the changing patterns of consumer behavior, particularly the increasing preference for online shopping and fast delivery. The company's decision to offer same-day delivery services through third-party apps like DoorDash and Uber Eats and the emphasis on quick turnaround times (an average of 50 minutes for same-day orders) demonstrate a keen adaptation to these market trends. This is further evidenced by their alignment with other major retailers like Target, Walmart, and CVS Health, who also turn to their physical stores for online orders, optimizing inventory management and maximizing the utility of existing locations.
Diversification and Specialization in Service Delivery: Walgreens is diversifying its service delivery by expanding the range of available items through popular platforms, moving beyond traditional pharmaceuticals to include everyday retail items. This diversification is coupled with a specialization in pharmacy operations, where they continue enhancing prescription fulfillment and delivery services. Establishing highly automated microfulfillment centers for online prescription orders and the continued focus on in-store pharmacists for urgent or controlled substance prescriptions highlight Walgreens' commitment to efficient and specialized service delivery in general retail and pharmacy sectors.
BJRI Ambitious Growth and Financial Targets Set for FY26 and Beyond
Yesterday, BJRI outlined an overly optimistic financial and growth strategy for FY26 and beyond, aiming for significant revenue and EBITDA growth, margin expansion, and a "robust" return of capital program. Why hold an event like this and not set a high bar for growth and financial performance in the coming years? With a clear focus on expanding its footprint and enhancing its menu, the company is poised for a dynamic phase of growth and profitability. Yet the track record and low returns suggest this will likely fall short. Restaurant industry dynamics around trends in food and labor costs will also play a significant role in the company's ability to deliver on these results. Here's a breakdown of their ambitious targets and strategic initiatives.
FY26 Financial Targets:
- Revenue: 1.60-1.65 billion was projected, marking a 19-23% increase from FY23.
- Adjusted EBITDA: Expected to be between 150-165 million, a 43-57% growth from FY23.
- Restaurant-Level Cash Flow (RLCF) Margins: Anticipated to be in the 15-16% range.
- Long-Term Growth Objectives:
- Sales Growth: Targeting a steady 7-10% annual increase, with compa aiming for low to mid-single-digit growth each year.
- New Restaurant Expansion: Planning for over 5% annual growth in new restaurant openings.
- RLM Margins: Seeking to exceed 16%, driven by sales leverage and cost savings.
- Capital Return: Aiming for a 2-3%+ return, supported by a share repurchase and dividend program.
- EBITDA & EPS Growth: Targeting 12-15% growth, with expectations for even higher growth in the near term.
Preliminary FY24 Targets:
- Total Capital Expenditure: Expected to be flat or lower year-over-year.
- Share Repurchases: Anticipated to be higher compared to previous years.
Strategic Initiatives and Commentary:
- New Restaurant Openings: The ramp-up for new restaurant openings has been moved to 2025, focusing on lower-cost prototypes.
- Restaurant Remodels: Accelerated remodels of existing restaurants are planned, promising attractive returns.
- Share Repurchases: The company restarted its share repurchase program in Q3'23, signaling confidence in its financial health and future prospects.
