PFCB – “Hope is not a process” – but it’s something

If PFCB did not go down today, it’s not likely to go much lower unless sales begin to look like they did in December. As we sit here today, PFCB is hopeful that same-store sales trends will be worse in 1H09 than in 2H09. When questioned about its forecast for a 2H improvement, management stated that it is based primarily on “internal optimism” (again hopeful!) that the environment will improve from a macro perspective. Although we always say at Research Edge that “hope is not a good investment process,” PFCB has taken the appropriate steps to proactively manage for this challenging environment by significantly cutting unit growth and capital spending (down nearly 43% YOY in 2008 and expected to be down over another 50% in 2009). Additionally, the company is extremely focused on managing costs more efficiently, particularly at its Pei Wei concept. That being said, I would agree with management’s comment that if and when there is some relief to the consumer, PCFB would share in the benefit.

Management also stated that should sales trends remain at such depressed levels (though sales trends to date are ahead of the company’s internal forecasts), that investors should not expect 2009 margin performance to fare as well as it did in 2008. I think this is an important point for all full-service restaurants. In 2008, companies worked to eliminate costs wherever possible in an attempt to protect margins. Most companies have already slowed unit growth significantly and have cut the fat out of their systems in order to mitigate the margin declines associated with sales deleverage in 2008. There is not much more these companies can do to benefit margins on a YOY basis outside of driving sales higher.


Did the US Economy Just “Collapse”? "Worst Personal Spending Since 2009"?

This is a brief note written by Hedgeye U.S. Macro analyst Christian Drake on 4/28 dispelling media reporting that “US GDP collapses to 0.7%, the lowest number in three years with the worst personal spending since 2009.”

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7 Tweets Summing Up What You Need to Know About Today's GDP Report

"There's a tremendous opportunity to educate people in our profession on how GDP is stated and projected," Hedgeye CEO Keith McCullough wrote today. Here's everything you need to know about today's GDP report.

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Cartoon of the Day: Crash Test Bear

In the past six months, U.S. stock indices are up between +12% and +18%.

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GOLD: A Deep Dive on What’s Next with a Top Commodities Strategist

“If you saved in gold over the past 20 to 25 years rather than any currency anywhere in the world, gold has outperformed all these currencies,” says Stefan Wieler, Vice President of Goldmoney in this edition of Real Conversations.

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Exact Sciences Up +24% This Week... What's Next? | $EXAS

We remain long Exact Sciences in the Hedgeye Healthcare Position Monitor.

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Inside the Atlanta Fed's Flawed GDP Tracker

"The Atlanta Fed’s GDPNowcast model, while useful at amalgamating investor consensus on one singular GDP estimate for any given quarter, is certainly not the end-all-be-all of forecasting U.S. GDP," writes Hedgeye Senior Macro analyst Darius Dale.

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Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

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People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

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UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

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Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

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Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

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An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

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