TALES OF THE TAPE: CMG, MCD, GMCR, YUM, MSSR, BOBE, DRI, KONA

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

 

MACRO

 

It’s not a great time to be an American consumer as confidence in Washington’s ability to run the country effectively wanes.  No doubt the current debt ceiling debate is doing little to boost consumers’ perception of their representatives.

 

On Friday, it was reported that confidence fell 7.7 points sequentially to 63.8 in June, the biggest decline since March and the lowest level since March 2009.  The expectations component led the decline, dropping 9 points to 55.8 (lowest level since March 2009) and the assessments of current conditions dropped 5.7 points to 76.3 (lowest level since November 2009).  This is not a shock to anyone paying attention to the data; the economic drivers of confidence remain very weak.

 

TALES OF THE TAPE: CMG, MCD, GMCR, YUM, MSSR, BOBE, DRI, KONA - UofM CCS 1 08 to 7 11

 

TALES OF THE TAPE: CMG, MCD, GMCR, YUM, MSSR, BOBE, DRI, KONA - subsector table

 

 

QUICK SERVICE

  • CMG (7/19) and MCD (7/22) report earnings this week.  The MCD results, in particular, will be important for the QSR space price action into the weekend.  These stocks have both hit all time highs recently.  Any disappointing results could bring some meaningful price corrections.
  • GMCR’s first ever TV commercial is airing this summer.
  • YUM traded down 1.5% on strong volume during Friday’s trading session.       

 

FULL SERVICE

  • MSSR - Tilman J. Fertitta announced that he is terminating, effective immediately, his previously announced tender offer to acquire, through his affiliate LSRI Holdings, Inc., a subsidiary of Landry's, all shares of common stock of McCormick & Schmick's Seafood Restaurants, Inc. in order to participate in MSSR's previously announced sale process.
  • BOBE - My bottom line is that sale-leasebacks don’t create shareholder value.  There are numerous examples in the retail/restaurant sector that validate this thought.  Just ask CBRL!
  • DRI’s Red Lobster ads are working.  The recent example of the TV commercial promoting the Four Course Seafood Feast was, according to Nielsen’s Recall Index, the sixth most remembered “new ad” of June 2011.
  • KONA traded up 4.2% on accelerating volume.

TALES OF THE TAPE: CMG, MCD, GMCR, YUM, MSSR, BOBE, DRI, KONA - stocks 718

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst


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