I know I just published this chart, but I wanted to use it to make a point about the Restaurant industry in general.


I’m always thinking about what could be the next leg to take restaurant stocks higher or lower.  We are nearing the point where the cost save thesis will be totally played out and food inflation will return – see the chart on the CRB Foodstuffs Index – it’s bottomed and headed higher.  One of the best ways to generate ALPHA in the restaurant industry is to find a disconnect between sales trends and margin trends.  In the restaurant industry, the relationship between sales and margins is very clear.  This is very evident when looking at CKE margins versus same-store sales, until very recently (3Q09).  Since then, margins have moved higher despite the continued fall off in sales trends.    


While I’m using CKE as a case study, it does not stand alone.  As I see it, for CKE and many other restaurant companies forward earnings are at risk.  Sales are declining and not likely to rebound until consumer confidence improves and job creation begins again.  Food costs are headed higher and the cost savings game has played out.


Just something to think about!  Do you get the idea that I’m not a fan of CKE Restaurants right now?





Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more

6 Charts: The French Election, Nasdaq All-Time Highs & An Earnings Scorecard

We've been telling investors for some time that global growth is picking up, get long stocks.

read more

Another French Revolution?

"Don't be complacent," writes Hedgeye Managing Director Neil Howe. "Tectonic shifts are underway in France. Is there the prospect of the new Sixth Republic? C'est vraiment possible."

read more

Cartoon of the Day: The Trend is Your Friend

"All of the key trending macro data suggests the U.S. economy is accelerating," Hedgeye CEO Keith McCullough says.

read more

A Sneak Peek At Hedgeye's 2017 GDP Estimates

Here's an inside look at our GDP estimates versus Wall Street consensus.

read more

Cartoon of the Day: Green Thumb

So far, 64 of 498 companies in the S&P 500 have reported aggregate sales and earnings growth of 6.1% and 16.8% respectively.

read more

Europe's Battles Against Apple, Google, Innovation & Jobs

"“I am very concerned the E.U. maintains a battle against the American giants while doing everything possible to sustain so-called national champions," writes economist Daniel Lacalle. "Attacking innovation doesn’t create jobs.”

read more

An Open Letter to Pandora Management...

"Please stop leaking information to the press," writes Hedgeye Internet & Media analyst Hesham Shaaban. "You are getting in your own way, and blowing up your shareholders in the process."

read more