THE HBM: TXRH, SONC, YUM, CMG, SBUX, CAKE

THE HEDGEYE BREAKFAST MONITOR

 

MACRO

 

Commodities

 

Cattle futures rose to a record as demand for U.S. beef is increasing as shrinking domestic herds signal tighter supplies and higher costs for restaurant companies like TXRH with exposure to beef.

 

The decline in gasoline prices is good for casual dining traffic but, if like in 2008 it is due to a fall in demand as economic conditions deteriorate, the benefit of cheaper gas may be offset.  The price action in casual dining stocks certainly suggests that lower gas prices are not bolstering sales significantly.

 

THE HBM: TXRH, SONC, YUM, CMG, SBUX, CAKE - gasoline prices

 

 

The ICSC chain store sales index rose 0.1% last week; the second week of little change. Year-over-year growth jumped to 3.7%, the fastest growth in nine weeks as sales fell in the comparable week last year.

 

 

SUBSECTOR PERFORMANCE

 

Yesterday was a tough day for all of the food, beverage and restaurants stocks.  Casual dining got beaten up again, declining -4.9% on average.

 

THE HBM: TXRH, SONC, YUM, CMG, SBUX, CAKE - subsector fbr

 

 

QUICK SERVICE

 

SONC: Sonic Corp. reported sales trends of 0.4% for the fourth quarter of its fiscal year ended September.  This represents a significant slowdown in trends for the drive-in chain.  The company expects positive same-store sales in FY12 and flat restaurant level margins.

 

THE HBM: TXRH, SONC, YUM, CMG, SBUX, CAKE - sonc pod1

 

 

YUM:  Yum! Brands reports after the close today and we will be listening carefully for commentary around trends in China in light of softening economic data.  We like YUM on the long side, believing that the company will deliver double-digit EPS growth for 2011.  Furthermore, in the past, concerns on China have provided favorable entry points for buyers of YUM’s stock.

 

CMG: Chipotle Mexican Grill was initiated Outperform at Credit Suisse. 

 

SBUX: Starbucks is offering any breakfast sandwich for $2 when customers buy any beverage from October 4-10that participating stores.

 

THE HBM: TXRH, SONC, YUM, CMG, SBUX, CAKE - sbux breakfast

 

 

CASUAL DINING

 

CAKE:  The Cheesecake Factory was rated consumers’ favorite casual-dining restaurant for the second year in succession, according to Market Force Information’s rankings of casual dining restaurants.  Texas Roadhouse and Olive Garden took silver and bronze, respectively.

 

THE HBM: TXRH, SONC, YUM, CMG, SBUX, CAKE - STOCK 104

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst


Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more