RESTAURANTS THOUGHTS AHEAD OF ICR

Below we highlight three topics, for each company, that we are hoping to gain insight into from this week’s ICR conference. 

 

We list the companies we care about in order of appearance at the conference.

 

Wendy’s is a work in progress

  1. The focus will be on marketing with the value menu getting a lot of attention as it poses real competition versus McDonald’s $1 menu
  2. Has the company lined up capital for franchisee conversions?
  3. The pipeline of new products for 2013 will be another key focus

 

Jack In The Box remains a Hedgeye favorite

  1. Any indication of current trends following MCD’s move to value will be helpful
  2. Investors will seek to learn management’s view of beef prices
  3. Any commentary on margins at Qdoba will be keenly received by a skeptical investment community

 

Texas Roadhouse is one of our least favorite names in casual dining

  1. New unit performance and returns are the key issues for this stock
  2. Commentary on the company’s commodity basket inflation expectations will be valuable
  3. Sales trends in what has become an increasingly competitive sub-category

 

BJ’s Restaurants’ shares need a catalyst

  1. We will be trying to discern how much of an impact Chili’s is impacting their top line
  2. Will the company provide incremental color on its testing of TV advertising
  3. With ROIIC trending negative, we will be hoping to get a finalized picture of CapEx for 2013

 

Burger King’s shares not appealing in 2013 but TAST is a better way to play the story

  1. Are franchisees being won over to the reimaging program?
  2. How are sales trends looking in January?
  3. What are full year expectations for same-restaurant sales

 

Ruth’s Chris is a boring company and a boring stock

  1. Might the company go private?  We think it should
  2. What are the company’s beef inflation expectations
  3. What makes the company believe that it has additional pricing power above the current 2.4% of pricing

 

Cracker Barrel seems to have played out

  1. Is there any leverage in the business model?
  2. The activist attack is unrelenting; what is management’s stance
  3. Can the concept garner appeal outside of the core consumer base

 

Ruby Tuesday’s new CEO has his plate full

  1. What size is the Ruby Tuesday system going to be in five years?
  2. How is the brand going to position itself under new leadership?
  3. What is the new CEO’s legacy going to be

 

Bloomin’ Brands has top line momentum but consensus is tough to get to

  1. Consensus is baking in very high leverage in the P&L and we do not think it is justified
  2. Same-restaurant sales trends, particularly at lunch, will be a primary focus for investors and analysts at ICR
  3. When will the PE firms unload stock in 2013?

 

 Domino’s is one of the best-managed companies in the restaurant space

  1. We will be looking for commentary on international growth opportunities
  2. More specificity on the outlook for commodities, in particular cheese, would be helpful
  3. Investors will likely press management on growth in the domestic market also

 

Chipotle’s management team will likely enjoy another ICR lovefest, we think the bottoming process will take time

  1. Sales trends, obviously, are front-and-center
  2. What is the company’s outlook for pricing?
  3. How are new unit volumes trending?  Will unit growth expectations be slowed?

 

 

Howard Penney

Managing Director

 

Rory Green

Senior Analyst

e

 


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