It’s interesting to note the same-store sales trend since October 2008:
November -2.6% (positively impacted by calendar shifts)
December -9.5% (negatively impacted by calendar shifts)
December was clearly an aberration for every retailer, either way the trends are clear; the pressure on the consumer is easing and/or the value promotions at casual dining is stemming the defection of consumers to supermarkets and QSR.
As we look into 2Q09, it’s unlikely we will see significant improvement in sales trends from the -3% to -5% levels. The issue facing all operators will be the impact on the P&L from discounting in an effort to drive customer counts. Year-to-date, the Full Service Restaurant (FSR) stocks on average have increased 20% versus 10% for the QSR stocks. I suspect the lack of a top line catalyst will mean the FSR stocks will take a breather. I would expect sales trends, however, to reaccelerate into the third and fourth quarter.
That being said, we are buyers of large cap, early cycle casual dining names (EAT, DRI, CAKE and PFCB) on down days. Right now I’m working on some of the names that have lagged so far this year like MSSR, MRT and LNY. Another thought would be to look at the QSR names that have underperformed so far this year like SONC, PEET, JACK and CMG.
I’m still not buying MCD, despite it being down 11% this year.