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The Knapp Track release for casual dining trends in May suggests that casual dining trends sequentially slowed from April to May.  Comparing the Blackbox data to Knapp Track, we can infer that trends at Darden continued to slow through May.

Malcolm Knapp released his Knapp Track casual dining sales numbers for May this weekend.  The May 2012 comparable restaurant sales change was -1.3% and the comparable restaurant guest count change was -3.9%.  The sequential change from April to May, in terms of the two-year average trend in Knapp Track casual dining comparable restaurant sales, was -80 bps.  For Knapp Track casual dining guest counts in May, the sequential change from April was -85 bps. 

The comparable store sales growth decline in May was the second in three months and implies that casual dining is still a group that investors should handle with care.  We have been advocating a cautious stance toward the casual dining group since mid-April.

Takeaways

Darden is emerging as a stock that could be emerging as a short or, at least, a stock that should not be bought.  The Knapp-Blackbox spread has declined over the course of the last three months, indicating that Darden (not included in Blackbox data but included in Knapp Track).  The spread has gone from +0.8% in February to -0.5%, -0.6%, and -0.9% in March, April, and May, respectively.

Besides the broader casual dining group, for Darden and Brinker this result is especially meaningful since those companies’ systems represent a large portion of the unit base from which the numbers are calculated.

Howard Penney

Managing Director

Rory Green

Analyst