Consumer Data


Personal Income growth in September came in at +0.1% versus expectations of +0.3% while Personal Spending came in at +0.6%, in line with Street expectations.  PCE Core came in at +1.6% y/y in September versus +1.7% expectations.  Consumers are decreasing their savings rate to spend.  This is not sustainable but, as we have seen in the past, stimuli can come via many different levers.  Nevertheless, the slow quarter-over-quarter personal income growth – worst since 2009 – is a looming cloud over the economic data this morning.



One of the top stories on Bloomberg this morning is titled “Restaurants Lift Prices to Catch Food-at Home Inflation”.  As we have been highlighting for some time, restaurants have some room to raise prices given the much bolder price hikes being taken in the grocery aisle.  The article is an interesting read, highlighting the “low cost entertainment” that eating out represents.





THE HBM: ARCO, EAT, MRT, CPKI - subsector fbr





ARCO: Arcos Dorados reported third quarter earnings and cut its revenue and EBITDA growth ranges.  Company sees full-year revenue growth 21-23% and adjusted EBITDA growth of 14-16%. 





EAT:  Brinker was the target of many skeptics over the past 24 or 36 hours.  Sterne Agee’s take on the stock was known yesterday but republished in Barron’s subsequently.  As we had suspected before seeing the details, caution on “Brinker’s ability to grow top line on a sustainable basis” is the reason behind the downgrade.  We take the other side of that bet, see our post from yesterday. 


MRT: Morton’s Restaurant Group reported a 3Q loss of -$0.11 versus expectations of -$0.112.  Comps came in at +5.1% which, as the chart below illustrates, implies a decline in two-year average trends.  On beef prices, Morton’s sees 5-10% inflation in 2012 but “have no real basis” for that number yet other than the bullishness they perceive from the beef processors on their pricing power.  Even as beef prices continue to go higher, MRT has 70% of beef needs for 2011 on a floating basis.  70% of 4Q needs are contracted, however.  In terms of demand and/or mix, Morton’s has not seen any substitution to seafood or other substitutes.  Of course, the consumer profile at Morton’s is not analogous to the general U.S. consumer but it is an interesting data point nonetheless that could indicate further pricing power for the brand.  Wall Street and Corporate America layoffs may be changing this however.





CPKI:  Golden Gate Capital has closed its latest fund at $3.5 billion, according to the NYT.  The fund had purchased a wide range of companies over the last twelve months, including California Pizza Kitchen.


THE HBM: ARCO, EAT, MRT, CPKI - stocks 1028




Howard Penney

Managing Director


Rory Green


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

read more

7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

read more

Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

read more

GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

read more

Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

read more

Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

read more

Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more