Recent Notes
03/17/14 Monday Mashup: MCD, KKD and More
03/17/14 DRI: Change Is Inevitable
03/20/14 Commodity Chartbook
03/20/14 Just Charts: CPI Data
Events This Week
Monday, March 24
- SONC earnings call 5:00pm EST
Tuesday, March 25
- PNRA Investor Day 10:30am EST
Wednesday, March 26
- CIBC Retail and Consumer Conference: THI
- TAG Spring Consumer Conference: BBRG
Thursday, March 27
- No Events
Chart Of The Day
Recent News Flow
Monday, March 17
- DNKN continues to expand into non-traditional locations, announcing the recent opening of a Dunkin’ Donuts/Baskin-Robbins restaurant at The Embassy Suites in downtown San Diego. DNKN now has more than 600 non-traditional locations in the U.S. and plans to continue to grow in the hotel and lodging sector.
Tuesday, March 18
- COSI named R.J. Dourney, Cosi’s largest franchisee, as President and CEO of the company. Former President and CEO, Stephen Edwards, will continue to serve on the company’s board.
- RRGB is adding a new wine milkshake, the Mango Moscato Wine Shake, to its menu for the spring season. The company plans to keep the offering on the menu through September 1st.
Wednesday, March 19
- JMBA announced its third annual National Hiring Day initiative in its commitment to improve youth job creation.
- BWLD is extending its three year partnership with the Boys & Girls Club of America. BWLD has committed a $1mm annual donation to the club.
Thursday, March 20
- DNKN announced plans to open six new restaurants throughout East Texas by 2018 with franchise group BG&A Investments.
- WEN launched a national marketing campaign, teaming up with actress and model Molly Sims to promote Wendy’s new salad offerings.
- MCD COO Tim Fenton announced his retirement from the company, effective October 1st. Fenton will then serve as a special advisor to CEO Don Thompson. Pete Bensen, EVP and CFO, and Steve Easterbrook, EVP and GCBO, will have broadened responsibilities as the company does not plan to replace the COO role.
- DFRG Two Del Frisco’s Grilles in Houston and Fort Worth were named to OpenTable’s Top 100 list, which recognizes the most popular restaurants in the country.
- JACK successfully completed its refinancing of bank debt, announcing a new five-year $800mm senior credit facility which includes a $600mm revolving credit facility and a $200mm term loan.
Friday, March 21
- DRI reported a weak, albeit expected, 3QF14. Management kept the Q&A session brief and ended the call abruptly after 45 minutes.
- PNRA reiterated underweight at Piper Jaffray with a PT of $137.
- CBRL mailed a definitive proxy for Special Meeting to shareholders, urging them to reject activist Biglari’s proposal. The company will hold a Special Meeting to give shareholders an opportunity to vote on the matter.
US Macro Consumption
Last week was another weak one for consumer stocks, with the XLY down -0.3% vs the SPX up +1.4%. Both casual dining and quick service stocks largely underperformed the XLY index. Despite this, the Hedgeye U.S. Consumption Model turned bullish from neutral and is now flashing green on 7 out of 12 metrics. We continue to believe the current environment is more conducive to select fast casual and quick service restaurants than casual dining restaurants.
XLY Quantitative Setup
From a quantitative setup, the sector remains bullish on an intermediate-term TREND duration.
Below we look at the performance of restaurant companies relative to the XLY and recent trends in earnings revisions estimates.
Casual Dining Restaurants
Top 5 Week-Over-Week Divergent Performances:
Positive Divergence: BWLD +5.7%, DFRG +4.1%, BJRI +4.1%, BOBE +3.6%, DRI +3.2%
Negative Divergence: CBRL-2.4%, RUTH -2.2%, EAT -1.0%, RT -0.6%, CAKE -0.6%
Notable 1-Month Earnings Revisions
Positive Revision: BJRI +0.3%, BWLD +0.2%
Negative Revision: BOBE -25.4%, DIN -5.7%, KONA -5.4%, BBRG -4.7%, BLMN -4.2%
Quick Service Restaurants
Top 5 Week-Over-Week Divergent Performances:
Positive Divergence: CMG +6.4%, PNRA +4.0%, SBUX +3.5%, TAST +1.6%, YUM +0.5%
Negative Divergence: KKD -7.4%, BKW -2.6%, DPZ -2.3%, SONC -2.2%, MCD -1.9%
Notable 1-Month Earnings Revisions
Positive Revision: DPZ +1.2%, JACK +0.6%, WEN +0.6%, GMCR +0.4%, YUM +0.3%
Negative Revision: TAST -8.1%, BAGL -5.9%, PLKI -4.4%, PZZA -2.1%, SONC -0.8%
Howard Penney
Managing Director
Fred Masotta
Analyst