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

MACRO

Today the National Federation of Independent Business index fell from 90.9 to 90.8 for June (the fourth consecutive month of declines.  June’s decline brings the cumulative drop since March to 4 points. The details were mixed-to-poor as hiring plans rose but small-businesses turned more pessimistic on the economy’s prospects. Expectations for the economy to improve over the next six months rose fell sharply in June, declining from -5% to -11% and its worst showing since July 2010.

Also today, the ICSC chain store sales index continued to show strengthening consumer spending in early July. The ICSC chain store sales index has grown strongly in the last three weeks, with a 0.4% gain in the latest week coming on the heels of gains of 1.5% and 2.9%. Hot weather reportedly stimulated sales of seasonal merchandise, outweighing the drag from higher gasoline prices.

The inflation rate in France unexpectedly climbed to the highest in more than 2.5 years, +2.3% y/y, in June as costs for food, energy and services rose. Crude oil prices have jumped 26% over the past year, forcing French motorists to pay more for gasoline and sapping households’ disposable income.

Gasoline prices remain a significant constraint on consumer spending, and are moving in the wrong directions again. Prices were up $0.06 last week, taking the average price of unleaded gasoline to $3.70 per gallon. 

QUICK SERVICE

  • SBUX is rolling out Bistro Boxes today: small meals under 500 calories, such as Chipotle Chicken Wraps and Sesame Noodles, that cost less than $6.
  • MCD has introduced a new entrecote premium burger in Israel that is branded as the “Big America Series” which includes the Big New York and Big Texas hamburgers. Both will be sold for about $9.20 or $14.50 with fries and a beverage.  This is a low price-point in Israel versus boutique chains, according to Ynet News.
  • TAST was cut to “Outperform” at Raymond James.

CASUAL DINING

  • BWLD was cut to “Market Perform” from “Outperform” at Raymond James.
  • RUTH was cut to “Market Perform” at Raymond James.

TALES OF THE TAPE: SBUX, MCD, TAST, BWLD, RUTH - stocks 712

Howard Penney

Managing Director

Rory Green

Analyst