CASUAL DINING TRENDS PREDICTABLY POOR

We’ve been bearish on the casual dining sector since early June, and, last night Malcolm Knapp gave us a glimpse of how ugly sales trends were in July when he released his estimates for the month.

Knapp reported that July 2013 same-restaurant sales declined -3.8%, while comparable traffic trends declined -5.1% -- both metrics slowed sequentially over a markedly weak June.  These estimates come against July 2012 comps of 1.1% and -1.3%, respectively.

While all four weeks had negative comparable sales and traffic results, we did find positive news on the margin, as Knapp indicated that each successive week in July was sequentially better than the prior.

Overall, July sales and traffic trends are in-line, if not slightly worse, with what we expected.  Consistent with what we’ve heard in recent earnings calls, this summer is presenting a challenging top line environment for the casual dining industry.  Our favorite short in the space remains RRGB, as they are set to report 2Q13 earnings a week from today on August 15th.

Howard Penney

Managing Director