Today, there are bullish calls on a number of QSR names, including Chipotle (CMG), YUM Brands (YUM) and a bullish initiation on the Wendy’s’/Arby’s Group (WEN).  CMG was also downgraded today, which seems a bit more justified after the stock’s 30% move in the last month and 42% move in the last three months.

There is also a negative call on SBUX this morning and according to Street Account the analyst cites “competitive pressures.”  I’m not sure if there are new pressures that we did not know about yesterday, or if this is a continuation of the street’s bullish call on MCD, my guess is the latter.  The consensus call on McDonalds is that the company can do no wrong and that the new beverage initiative will be a blow out success.  Specialty beverages are not a core competency for McDonald’s; they are expensive to install and complicate the back-of-the-house operations.  This is very different than improving the quality of the chicken nuggets or adding a salad and snack wraps.  I will concede that the success of the improved core drip coffee business gives McDonald’s some “coffee credibility.”  I believe that selling an upgraded drip coffee that people were buying anyway is different than trying to sell a premium product in a challenging economy. 


We have nearly completed a grass roots survey of SBUX March sales trends (not including California and Florida), and they are so good I don’t believe what I’m seeing.  Naturally, I provided a haircut to the numbers, but that would still put SBUX same-store sales (not including Florida and California) at down 2-4%.  Including the other two key states, March comparable sales for SBUX could be down 5-7%.  This would be a significant improvement from the trends in fiscal 1Q09 when same-store sales declined 10%.


An influential McDonald’s sales survey was released last night, which confirms our belief that McDonald’s sales trends are slowing.  The McDonald’s same-store sales chart is using reported numbers, but the timing adjusted numbers for January, February and March would be +3.4%, +6.8% and 4.6%, respectively.  This brings the underlying same-store sales average to 4.9% for 1Q09 vs. 5.0% in 4Q08.  It’s important to note that March and April are the last two easy comps for MCD this year!  Put that into context that the 2 and 3-year average same-store sales trends are already slowing.  This is clear evidence that McDonald’s senior management team is praying that the beverage strategy is a silver bullet for the US business.

As an aside, it looks like Easter hurt the U.S. by 0.5%-1% last year and helped Europe by 2%, so this year March numbers would be helped by about 0.5%-1% in the U.S. and hurt by 2% in Europe, which is why we adjusted the survey’s reported March 5.1% number down by 0.5%.  Even with the Easter timing benefit, however, US 2-year trends slowed in March.



Burger King today reported fiscal 3Q09 worldwide same-store sales of 1.0%, with the US and Canada up 1.6%.  The company stated that earnings were negatively impacted by significant traffic declines in the month of March, across most company-owned restaurant markets, resulting in lower than expected company restaurant margins for the quarter.  I recently highlighted same-store sales trends for the big three and BKC looked to be the loser.  The resurgence in WEN was always going to be bad news for BKC and other weaker competitors in the QSR segment.


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