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The Knapp Track numbers from February were, on a two-year average basis, stronger than January’s. 

Malcolm Knapp released his Knapp Track casual dining sales numbers for February this weekend.  He cited weather as an important factor in the results; highlighting Texas, the Midwest, and the eastern region of the country as areas where the harsh weather of last year made for particularly easy compares in 2012 to-date.  On February 22nd, we highlighted data from the National Operational Hydrologic Remote Sensing Center in order to approximate the year-over-year difference in snow coverage in three regions: the Midwest, the East Coast, and the South.  We would make to statements about the Knapp Track numbers at this point.  First, it will difficult to ascertain the true underlying trend in this data set until April’s results emerge.  Second, traffic trends are disappointing when we consider that weather is boosting sales quite substantially in 1Q12.

Estimated Knapp Track casual dining comparable restaurant sales grew 2.8% in February versus a final accounting period number of 3.3% (prior estimate 3.2%) in January.  The sequential change from January to February, in terms of the two-year average trend, was +50 bps.

Estimated Knapp Track casual dining comparable guest counts declined -0.1% in February versus a final accounting period number of 1.2% (prior estimate 0.5%) in January.  The sequential change from January to February, in terms of the two-year average trend, was +35 bps.

It is disappointing to see traffic trends so soft even with the benefit of weather.  CPI for Food Away from Home clearly shows that prices are being raised more than last year at restaurants but the cushion that operators have at their disposal in terms of pricing (CPI for Food at Home versus CPI for Food Away from Home) is shrinking.  Companies facing high levels of cost inflation in 2012 (we would highlight TXRH and BWLD) may have to choose between margin and continued top line strength although we will have to wait until the weather impact falls off before becoming certain.  Please refer to our note, titled “BWLD UPDATE”, for our current thoughts on BWLD.

FEB KNAPP TRACK - food at home vs food away from home

Howard Penney

Managing Director

Rory Green

Analyst