Comments: Keith sold EAT yesterday based on our concerns about casual dining sales starting to slow.  We have liked this name for a long time, as we wrote yesterday, but these stocks trade together and Chili’s will not be immune to any slowdown in industry trends.






CPI data for March was released by the Bureau of Labor Statistics yesterday.  Inflation for Food Away from Home slowed to 3% from 3.1% and inflation for Food at Home slowed to 3.6% from 4.5%.  The spread between the two narrowed from 140 basis points to 60 basis points.  The benefit that restaurants received from grocery aisle inflation being so rampant on a relative basis last year is quickly going away.


THE HBM: COSI, EAT - food at home vs food away from home



Commentary from CEO Keith McCullough


Someone saying Growth Slowing, globally:

  1. CHINA – GDP growth slows from 8.9% Q4 to 8.1% Q1, missing whatever whisper found its way into the mo mo community yesterday (someone should tell them Global Macro isn’t like small cap rumoring); Chinese stocks acted fine on that b/c they act inversely w/ Commodity inflation and Chinese bank lending. Commodities bulls freak out.
  2. EUROPE – certified train wreck remains in motion – its not different this time – you can’t ban economic gravity when imposing Stagflation on your people (Italian CPI +3.3% with Growth flat to down); Sold my long Germany position yesterday and re-shorted France b/c I think the gap b/t Spain -12% YTD and France’s CAC +2% YTD is going to narrow #Mean Reversion
  3. GROWTH SLOWING – away from the economic data (which now includes US employment gains slowing), Copper and 10yr UST yields are the most obvious signals this morning w/ Copper moving into a falling knife formation (-1.6%) and 10yr slicing back through my intermediate-term TREND support of 2.03% to 2.01% last.

SP500 failing at my 1391 line yesterday keeps my entire intermediate-term Growth Slowing thesis intact.






THE HBM: COSI, EAT - subsecto





COSI: Cosi is planning to launch a rights offering for up to 19.9% of the company’s common stock to its shareholders.  Assuming the rights offering is fully subscribed, the company currently expects to receive gross proceeds of approximately $15m.




CMG: Chipotle gained 2.5% on accelerating volume.


CBOU: Caribou declined 2.6% on accelerating volume.





EAT: Brinker was pleased with the opinion released yesterday by the California Supreme Court that, according to the company, “effectively truncates the Hohnbaum class action lawsuit” that the company was facing and “resolves the legal standards to be applied to California meal period and rest break actions”.




EAT: Brinker gained 1.3% on accelerating volume.



THE HBM: COSI, EAT - stocks



Howard Penney

Managing Director


Rory Green



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