THE HBM: SBUX, PZZA, PNRA, RT, YUM

THE HEDGEYE BREAKFAST MENU

 

Notable MACRO data points, news items, and price action pertaining to the restaurant space.

 

MACRO NOTES

 

U.S. Consumer spending rose 0.2% in August while incomes declined 0.1%.  The personal savings rate declined to 4.5%, the lowest level since 2009.

 

SUB-SECTOR PERFORMANCE

 

The downward trajectory of corn prices is leading the food processor stocks higher.

 

THE HBM: SBUX, PZZA, PNRA, RT, YUM - hfbrd

 

QUICK SERVICE

 

YUM’s stock is getting a shellacking on growth concerns in China.  Some of the entry points on the long side of YUM have come at similar times in the past. 

 

The coffee category is getting crushed, declining 8 of the last 10 days.  At the time of writing the DNKN Black Book, we believed that the coffee stocks were in a bubble and we still believe most stocks within that universe are overvalued – particularly DNKN.

 

DNKN was initiated “New Hold” at Argus Research.

 

PZZA saw a big franchisee go bankrupt this week.  Essential Pizza, which operates 72 Papa John's in Minnesota and Colorado, went bankrupt this week after its secured creditor, GE Capital, appointed a receiver who quickly froze the company's funds.  The franchisee has laid the blame at the franchisor’s door, claiming that the company sold defective dough to the Essential Pizza.

 

PNRA’s third “pay-what-you-wish” café in Portland, Oregon has not gone as well as the two prior social experiment/PR projects in St. Louis and Detroit.  The west-coast iteration, not surprisingly, has attracted homeless and impoverished customers that have taken advantage of the company’s generosity and hospitality.

 

SBUX CEO "No summer slowdown"

 

FULL SERVICE

 

DRI, BJRI, and KONA all declined sharply on strong volume studies.

 

RT was the standout on the upside yesterday for casual dining.

 

THE HBM: SBUX, PZZA, PNRA, RT, YUM - qsr

 

 

Howard Penney

Managing Director

           

 

Rory Green

Analyst


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