Industry data is indicating that casual dining restaurant companies saw a sequential uptick in trends in November from October.
Casual Dining comparable restaurant sales growth for November 2012 was +0.7% versus -0.9% in October and +0.6% in November 2011. This is a sequentially better number; the two-year average trend improved by 75 bps month-over-month.
Casual Dining comparable restaurant guest counts growth for November 2012 was -0.9% versus -2.8% in October and -1.6% in November 2011. The sequential change, in terms of the two-year average trend, was +55 bps.
This number is also sequentially better but, for the broader industry, negative traffic growth is still a concern given the ever-increasing level of discounting casual dining operators are implementing in their restaurants.
We remain bearish on DRI and BWLD. Our favorite name, on a relative basis, in casual dining is EAT.
We believe that consensus likely remains too bullish on casual dining trends in FY13, given the 2-3% comps that are being projected for the industry, on average, for 1H13.
The Restaurant Value Spread could be at the beginning of a bottoming process, as the first chart below suggests, but we will be looking to gain more conviction on that when the BLS releases November CPI data on the 14th of December. If the slope of the line representing the spread does begin to reverse, it would be a marginal positive for casual dining traffic.