KNAPP NUMBERS BETTER IN SEPTEMBER

The Knapp Track report for September shows a sequential improvement in casual dining trends from August.

 

Estimated Knapp Track casual dining comparable restaurant sales grew +2.0% in September versus a final accounting period number of +0.4% (versus the prior estimate of +0.1% with negative weather impact of 60 bps) in August and +1.2% in September 2010.  The sequential increase from August to September, in terms of the two-year average trend, was 130 basis points. 

 

Estimated comparable guest counts were flat in September versus an August number of -1.0% and -1.4% in September 2010.  The sequential increase from August to September, in terms of the two-year average trend, was 110 basis points.

 

While the September Knapp Track numbers were stronger than we had anticipated, there are a number of factors worth noting.  Firstly, as Malcolm Knapp notes in the text of his report, the accounting number for the month of September will be “a bit lower” than the weekly estimate because, the report states, some concepts will include the last week in August in their September accounting results.  The first week of September benefitted from a rebound in comparable sales following Hurricane Irene as electricity grids were down and homes were flooded. 

 

One additional factor in September was the decline in gasoline prices.  Clarence Otis, CEO of Darden Restaurants, highlighted elevated gasoline prices as a major headwind for casual dining during DRI’s 4QFY11 earnings call on July 1st.  As the chart below shows, gas prices were extremely high during the second calendar quarter, peaking in May.  We believe that the significant fall-off in gas prices aided casual dining sales in September. 

 

KNAPP NUMBERS BETTER IN SEPTEMBER - gas prices 1016

 

KNAPP NUMBERS BETTER IN SEPTEMBER - gas price deltas

 

 

All in all the Knapp data points are positive for casual dining stocks, on the margin.  We are not positive on casual dining stocks generally as we head through 4Q given the poor jobs outlook and poor consumer confidence levels.  EAT remains our favorite stock in the space.  We are negative on BWLD and TXRH.

 

 

Howard Penney

Managing Director

 

Rory Green

Analyst

 


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