Conference Call Takeaways - TAST and TXRH

Summary Thoughts….


Both companies’ earnings benefited from cost cutting and commodity deflation.

 

Both companies are more cautious regarding top line expectations for the balance of the year, given current economic conditions, the increasingly competitive environment, as well as recent sales trends. 

 

Reduced capital spending is helping to reduce debt and increase cash on the balance sheet

 

TAST COMMENTS


COMMENTS ON TEXAS - Although the Texas economy has held up better than most of the country for some time, TAST said it is seeing some softening and mounting consumer pressures.  Recent unemployment reports indicated that conditions have worsened, and although the June unemployment rate at 7.5% is below the national average, Texas lost the most jobs, second only to California in June.

 

THE $1 MENU - In response to a question about whether advertising supporting the $1 Whopper Junior has begun to at least shift the trajectory of sales in July, or will the upcoming coupon help, management stated, “Yes, the Whopper Junior advertising is maybe two weeks old, so -- the early returns for the last couple of weeks, the sales have continued to struggle.”  The dollar menu is no longer a unique message to consumers.


CURRENT SALES TRENDS - MAY/JUNE/JULY BKC comps were down 5%+.  The Breakfast day part is getting hurt the most.  Thank you MCD.

 

TXRH COMMENTS


SALES TRENDS SLOWED DURING THE QUARTER - For the quarter, the entire sales decrease was driven by lower traffic, as average check was flat.  By month, comparable restaurant sales were down 3.2% in April, down 3.7% in May and 4.4% in June.  In addition, as reported in the company’s press release, comparable restaurant sales for the first four weeks of the third quarter were down 5.5% to 6%.

 

NEGATIVE FORWARD-LOOKING INDICATOR - Average unit volume decreased 5.1% for the quarter, compared to the same-store sales decrease of 3.7%.

 

RETURN TO GROWTH – In the short run, there is no change to current development plans.  But, the company will accelerate to faster growth when it sees lower development costs and a better economic climate.

 

COMMENTS ON TEXAS – “We saw things in Texas specifically get a little bit softer during the June period, but then come back. Historically, Texas has been -- or recently, Texas has been a pretty strong state for us, as well as you mentioned for others, I believe. We did see things get a little bit softer in the latter part of the quarter in Texas.”

 

This could be a potential negative for EAT in the upcoming quarter.      


Cartoon of the Day: Acrophobia

"Most people who are making a ton of money right now are focused on growth companies seeing accelerations," Hedgeye CEO Keith McCullough wrote in today's Early Look. "That’s what happens in Quad 1."

read more

People's Bank of China Spins China’s Bad-Loan Data

PBoC Deputy Governor Yi says China's non-performing loan problem has “pretty much stabilized." "Yi is spinning. China’s bad-debt problem remains serious," write Benn Steil and Emma Smith, Council on Foreign Relations.

read more

UnderArmour: 'I Am Much More Bearish Than I Was 3 Hours Ago'

“The consumer has a short memory.” Yes, Plank actually said this," writes Hedgeye Retail analyst Brian McGough. "Last time I heard such arrogance was Ron Johnson."

read more

Buffalo Wild Wings: Complacency & Lack of Leadership (by Howard Penney)

"Buffalo Wild Wings has been plagued by complacency and a continued lack of adequate leadership," writes Hedgeye Restaurants analyst Howard Penney.

read more

Todd Jordan on Las Vegas Sands Earnings

"The quarter actually beat lowered expectations. Overall, the mass segment performed well although base mass lagging is a concern," writes Hedgeye Gaming, Lodging & Leisure analyst Todd Jordan on Las Vegas Sands.

read more

An Update on Defense Spending by Lt. Gen Emo Gardner

"Congress' FY17 omnibus appropriation will fully fund the Pentagon's original budget request plus $15B of its $30B supplemental request," writes Hedgeye Potomac Defense Policy analyst Lt. Gen Emerson "Emo" Gardner USMC Ret.

read more

Got Process? Zero Hedge Sells Fear, Not Truth

Fear sells. Always has. Look no further than Zero Hedge.

read more

REPLAY: Review of $EXAS Earnings Call (A Hedgeye Best Idea Long)

Our Healthcare Team made a monster call to be long EXAS - hear their updated thoughts.

read more

Capital Brief: 5 Things to Watch Right Now In Washington

Here's a quick look at some key issues investors should keep an eye on from Hedgeye's JT Taylor and our team of Washington Policy analysts in D.C.

read more

Premium insight

[UNLOCKED] Today's Daily Trading Ranges

“If I could only have one thing of the many things we have it would be my daily ranges." Hedgeye CEO Keith McCullough said recently.

read more

We'll Say It Again: Leave Your Politics Out of Your Portfolio

If your politics dictates your portfolio positioning, the Democrats and #NeverTrump crowd out there have had a hell of a week.

read more

Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more