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August Restaurant Sales and Employment Trends

Black Box Sales, Traffic

Black Box released same-restaurant sales and traffic estimates for the month of August that showed slight improvement sequentially, although still down YoY. Same-restaurant sales grew to +1.7% up 10bps sequentially, but down 40bps YoY and same-restaurant traffic decreased -1.1%, a 10bps sequential improvement, and down 60 bps YoY.

August Restaurant Sales and Employment Trends - CHART 1

August Restaurant Sales and Employment Trends - CHART 2

 

Restaurant price increases are continuing to taper off, after the nearly 12-months of increases. Not surprisingly, after the last three months of flat to down pricing, traffic is continuing to accelerate month over month.  As you can see from the chart below, the divergence between the operators taking price and a decline in traffic is reversing and it looks like they are headed to cross again. In August there was a continuation of the uptick in traffic we saw in July, although slightly less of a sequential improvement.

August Restaurant Sales and Employment Trends - CHART 3

 

Knapp August Sales Trends

Knapp reported that comparable restaurant sales in August 2015 were +0.9% for same-store sales and -1.0% for guest counts.  August comparable restaurant sales represent a sequential acceleration of +50bps, additionally traffic sequentially is up 30bps for the month.  On a 2-year basis, sales accelerated to +0.8% and traffic decelerated at a slower pace, down -1.5%. 

 

Employment Growth Slowing

In the month of August we saw a marked improvement in the employment trend, driven by growth within the 20-24 YOA cohort. The downward trend that we were concerned about seems to have reversed; continued growth among younger workers is encouraging for the quick service segment. The losses among the 45-54 YOA cohort continued in this month, down -0.43% YoY and -24bps sequentially.

 

August Employment Growth Data:

  • 20-24 YOA +3.1% YoY; +245.2 bps sequentially
  • 25-34 YOA +2.35% YoY; +4.3 bps sequentially
  • 35-44 YOA +1.26% YoY; -3.6 bps sequentially
  • 45-54 YOA -0.43% YoY; -23.9bps sequentially
  • 55-64 YOA +1.57% YoY; -95.1bps sequentially

 

August Restaurant Sales and Employment Trends - CHART 4

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 


Cartoon of the Day: Disappearing Spanish Bulls

Cartoon of the Day: Disappearing Spanish Bulls - z xx

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Hedgeye Statistics

The total percentage of successful long and short trading signals since the inception of Real-Time Alerts in August of 2008.

  • LONG SIGNALS 80.64%
  • SHORT SIGNALS 78.57%

RTA Live: September 15, 2015

 

 



K | NICE MOVE, BUT NOT ENOUGH

Kellogg (K) is currently on our Hedgeye Consumer Staples SHORT bench.

 

Today K announced a long-term strategic partnership that will significantly expand their presence in Africa. The deal consists of a joint venture in which Kellogg will own a 50% stake in Multi Pro, a premier sales and distribution company and subsidiary of Tolaram Africa. In addition, Kellogg has the right to acquire a stake in Tolaram Africa Foods, which owns 49% of Dufil Prima, a manufacturer and marketer of Indomie noodles, Minimie snacks, Power oil and Power pasta.

 

DEAL DETAILS

Kellogg has agreed to pay $450mm for a 50% stake in Multi Pro and the option to purchase a stake in Tolaram Africa Foods. Total sales are expected to be approximately $750mm in 2015. The purchase price represents a multiple of the average of 2014’s actuals and 2015’s expected total EBITDA of 15x, and 13x 2015’s expected EBITDA. The final purchase price is dependent on actual results for EBITDA in 2015.

 

K will fund the acquisition with international cash and an increase in commercial paper of $350mm. K is expecting a neutral impact to EPS in 2015 and 2016 and slight accretion in 2017. The costs associated with the acquisition will lower reported earnings in 3Q15 by approximately $0.01.  

 

HEDGEYE OPINION

We view this transaction as a great move for Kellogg as it expands their emerging market presence in Africa. But this deal simply is not big enough to make a difference on its own. The true test for K and to turn sentiment more positive will be the resurrection of the U.S. business, which has yet to come to fruition. We are strong believers in the resurgence of the cereal category, and although our thesis that GIS will be a leader in this movement, K will also partially benefit. But for us to turn positive on K it will take a lot more than sequential growth in cereal.

 

We have a positive outlook on growth prospects in Africa, and expect further M&A action from international food manufacturers such as Nestle, General Mills and Mondelez to take place in the region. South Africa in particular given it is already developed will be a focus for these multinational companies.

 

Please call or e-mail with any questions.

 

Howard Penney

Managing Director

 

Shayne Laidlaw

Analyst

 

 

 

 

 


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