THE HBM: PZZA, CAKE, TXRH

THE HEDGEYE BREAKFAST MONITOR

MACRO NOTES

Consumer

The ICSC chain store sales index remained consistent with modest spending growth and continued seasonal volatility.  Last week, the index gained 3.0% (4 week moving average is now 0.7% vs -0.4% last week), reversing the prior week’s -2.0% decline. Year-over-year improved modestly to 3.2% from 2.8% (4 week MA improves to 3.4% from 3.3%).  Unusually warm weather and Valentine’s day helped to offset rising gasoline prices.

Comments from CEO Keith McCullough

Finally, Top 3 Most Read (after Greece at #1) = Oil Rising at #2 and China Slowing #3 – the rest of the world didn’t cease to exist!

  1. GROWTH – pick your overnight economic data point, from German PMI slowing sequentially in FEB to 50.1 vs 51 JAN to Taiwan Exports dropping -8.6% y/y in JAN, I think we’re just getting started here. What happens on the margin m/m matters most. Inflation, from these levels, slows growth.
  2. INFLATION – Italian CPI +3.2% y/y JAN (stagflation), India CPI pops to +7.7% JAN vs 6.6% DEC, and Hong Kong CPI up to 6.1% JAN vs 5.7% DEC –these are all JAN numbers that don’t include this rip in the CRB Index, Oil, etc in FEB.
  3. YEN – complete meltdown on our immediate-term TRADE duration w/ the Japanese Yen in free-fall, accelerating to the downside this morning to 80.16 vs USD. At the same time, short-term UST’s are spiking above my TREND line of 0.26% and 10s are above the critical 2.03% line this morn. Big sov debt maturity spike in Japan in March.

Got Sov Debt risk in Japan and the USA? Just when everyone stopped thinking running deficit and debt levels like this didn’t matter? These are risk mgt questions that don’t have tidy answers, unfortunately. I get paid to ask them when markets do.

KM


 

SUBSECTOR PERFORMANCE

THE HBM: PZZA, CAKE, TXRH - subsecotrs

 


QUICK SERVICE

PZZA: Papa John’s reported 4Q EPS of $0.65 versus $0.62 consensus.  Comps missed, coming in at 1.7% versus 4.3% consensus for North American system-wide comparable sales.  EPS guidance for 2012 was reaffirmed $2.33-2.43 versus consensus $2.44.

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

JMBA: Jamba gained +6.1% on accelerating volume yesterday.

 

CASUAL DINING

CAKE: Cheesecake Factory reported a low quality beat.  Favorable tax and an extra week were essential to the $0.53 4Q EPS number versus $0.52 expectations.  The outlook for unit growth was also altered as some opening dates have been pushed out.  The guide down for 1Q and lack up guide up on the full year, despite raising FY12 comp guidance, were the two main points that drove the stock down post market.  See our CAKE post from this morning for further details.

CAKE: Cheesecake Factory was reiterated “Buy” at Sterne Agee.  The PT remains $36. 

TXRH: Texas Roadhouse reported 4Q EPS of $0.18 versus consensus $0.16.  Comparable restaurant sales came in at +5.6% in 4Q.

THE HBM: PZZA, CAKE, TXRH - txrh pod1

 

NOTABLE PERFORMANCE ON ACCELERATING VOLUME:

CBRL: Cracker Barrel gained 4% on accelerating volume yesterday after strong earnings before market open.

KONA: Kona continues to get hit on strong volume.

THE HBM: PZZA, CAKE, TXRH - stocks

Howard Penney

Managing Director

Rory Green

Analyst