THE HEDGEYE BREAKFAST MONITOR
MACRO NOTES
Comments from CEO Keith McCullough
Top 3 Most Read on Bloomberg = Greece. Meanwhile the rest of the world’s Growth Slowing (sequentially) doesn’t cease to exist:
- FRANCE – now that we have a +18% German DAX rally (YTD) out of the way (Greece was +23% at its YTD peak), we can focus on separating the weak parts of European growth from the strong (Germany). France’s CAC40 fails to breakout above its long-term TAIL of 3565 resistance again. Growth Slowing in France is a major problem – so is Hollande’s continued momentum in the polls vs Sarkozy.
- OIL – never in the history of Global Consumption has $100 handle per barrel (pick your flavor) not slowed Consumption. On the margin is where discretionary consumption matters and if we push toward $5 at the pump, I think you’ll see this time is not different. After being long Consumer Discretionary (XLY) for most of December-January (on Strong Dollar = Strong Consumption), I shorted it on Friday.
- 10yr YIELD – this is the 2nd time this year that we’ve seen an intraday test of my 2.03% intermediate-term TREND line for 10yr Treasury yields. A sustained close > than this line could tip flows from bonds to stocks. But I need to see this confirm for at least 3 weeks in a row, not 6 hours.
China wouldn’t have cut the reserve requirements if Growth Slowing wasn’t a bigger problem than expected right here and now.
KM
SUBSECTOR PERFORMANCE
QUICK SERVICE
SBUX: Starbucks CEO Howard Schultz addressed the country’s unemployment rate on CNN’s “State of the Union”. He believes that the unemployment rate is “still disastrous”.
MCD: McDonald’s features in an interesting article on adage.com, published on Sunday, that cites “people close to the company” as saying that “its internal tracking system finds that McDonald’s consistently ranks near the bottom in quality perception when compared to rivals”. The company is working to close the gap, these people said, by addressing issues related to perceptions about its food quality, sourcing and nutritional value; sustainability practices, including suppliers’ treatment of animals; service; and condition of stores.
NOTABLE PERFORMANCE ON ACCELERATING VOLUME:
THI and JACK: gained 1.2% on accelerating volume.
CASUAL DINING
CBRL: Cracker Barrel reported Adjusted 2QFY12 EPS of $1.20 versus expectations of $1.14. Restaurant comps improved sequentially throughout the quarter, coming in at +3.5% versus consensus of +1.1%. Average check was up +2.4% and traffic was up 1.1%. Cost of goods sold were 35% of sales versus 35.6% consensus. The company raised guidance; FY12 EPS is expected to be between $4.20-4.35 versus consensus $4.29. Guidance reflects increases in comparable store restaurant and retail sales in a range of +1-2%.
NOTABLE PERFORMANCE ON ACCELERATING VOLUME:
PFCB: One of our top longs, this stock got a couple of upgrades on Friday. Kona COO taking up the COO job at P.F. Chang’s China Bistro also positive.
BJRI: Down -3.2% on accelerating volume
KONA: Larry Ryback leaving the firm is the latest in a series of bad news for Kona Grill.
Howard Penney
Managing Director
Rory Green
Analyst
