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Bloomin’ Brands (BLMN) is on our Hedgeye Restaurants SHORT bench.



Last week we released a note on BLMN, previewing the quarter as well as introducing the STEAK TRACKER. Our core thesis on BLMN is that they need to divest non-core assets and focus on the core concept, Outback. This point was especially evident in this quarter as they lacked innovation and for the third year in a row rolled out a steak and unlimited shrimp promotion that did not resonate with consumers this time around. Traffic ended down -0.9% in the quarter for Outback, evidence that this lack of attention is not sustainable long-term.


During the call management spoke to sweeping remodels across the Outback system, renovating the exteriors of all stores over the next three years. The conviction in this initiative is the result of positive tests at 33 trial stores which showed 5% sales growth post remodel. Additionally, to our liking, management is focused on international growth. Outback Brazil had comp growth of 6.9% and Korea had traffic growth of 13.8% in 3Q15. BLMN is focused on investing “significant capital” in Brazil and looking for expansion opportunities across the world in areas such as the Middle East, China and Australia.


Even with this, we are still bearish on BLMN until they decide to divest non-core assets. Multi-concept casual dining restaurant companies in our eyes are destined to fail, as proper capital allocation is difficult to preserve.



Outback SSS trend continued in line with what we were seeing in the steak tracker heading into the quarter. The correlation between Outback US SSS and Men Employment 55-64 YOA tightened in the quarter from 0.72 to 0.74. This specific tracker has been dependable in predicting the trend of Outback SSS and we continue to grow more confident in it.



Our other trackers, the more long term in nature, CPI – Uncooked Beef Steak and CPI – Beef and Veal, held up well. Although, the correlation decreased slightly, we are using them for trends not quarterly ebb and flows and those remained accurate.





BLMN reported revenue declined 3.6% YoY to $1,027mm versus consensus estimates of $1,035mm. The top line miss was driven by bad same-store sales growth for all concepts. Outback US SSS increased 0.1% versus consensus estimates of 1.7%, a 470bps YoY decline. Bonefish reported SSS of -6.1%, 80 bps below consensus estimates of -5.3% and a 870bps decline YoY. Carrabba’s SSS came in at -2.0%, 310bps below consensus estimates of 1.1% and representing an 80bps decline YoY. Restaurant level operating margins improved 70bps in the quarter to 14.5% in-line with consensus estimates. Moving to the bottom-line BLMN was able to translate a top-line miss into a bottom-line beat, reporting EPS of $0.15 versus consensus estimates of $0.14.







Management reaffirmed full year EPS guidance of at least $1.27. The company revised blended US comp growth to be 0.5% to 1.0% versus prior guidance of “approximately 1.5%”. Total revenue guidance was shaved slightly, to approximately $4.37bn down from approximately $4.43bn.


Looking to FY2016, management expects EPS growth of 10% to 15%, with positive SSS in the U.S. Additionally management is calling for commodity basket inflation of approximately 1%. This number is variable depending on how beef shakes out through the course of the year.


Please call or e-mail with any questions.


Howard Penney

Managing Director


Shayne Laidlaw




Takeaway: Very bullish October commentary somewhat incongruent with slightly lower guidance


  • Hospitality Results (excludes AC Hotel at National Harbor, D.C.)
    • SS Revenue +1.5% YoY, Total +3.2% YoY
    • SS Adj EBITDA +7.8% YoY, Total +8.9% YoY
    • SS Adj EBITDA margin +1.8% (29.8% vs 28.0% in 2014)
    • Total Adj EBITDA margin +1.5% (28.2% vs. 26.7% in 2014)
    • OCC -2.1% YoY, ADR +1.1% YoY, RevPAR -1.8% YoY, Total RevPAR +1.5% (room rennovations at Gaylord Opryland and Gaylord Texan)
  • Gross Room nights booked +24.1% YoY, leads for group bookings are +10% YoY
  • Group Attrition -4.0% YoY, worse than they anticipated but they don't see systemic issues with the group segment as a result  
  • Cancellations actually second lowest in last 8 years. Q3 is seasonally the worst time for cancellations
  • Opryland - flat revenues, OCC -6.1% YoY, partially offset by strong banquet revenue 
  • Palms - Revenues -16.7% YoY, OCC slowed due to calendar shift
  • Texan - Revenues +12.1% YoY,  OCC +2.2%, ADR +6.8% YoY (could be adding more group space to this property) 
  • National - Revenues +7.0% YoY, strong banquet performance drove results 
  • FY 2015 Guidance - RevPAR guidance top end lowered due to a larger leisure component in November and December. Comps are very hard in November and December (RevPAR in mid to high teens for both months).
  • RHP 3Q CONFERENCE CALL NOTES  - rhp guidance
  • 2016 view of strong future has not changed. 100k more room nights currently booked vs. the same period a year earlier. (10% more YoY)
  • Exploring opportunity to expand more group space and also look into options to expand the transient side of their business. 
  • Transient rate increase have been positives and they are postioned well for the transient segment in 4Q
  • Albeit slower, economy still growing, they maintain their positive views based on their group demand. 
  • October has been the best october ever, generating $100M, October RevPAR +16% across the portfolio and 13% in total RevPAR
  • 85+% in consolidated OCC for October 
  • Cite markets concern with REIT's ability stay attractive amid possible rate rises. They are not concerned with their ability to boost their dividend, and very bullish on the properties they own.  


  • 100% of additional room nights booked are all corporate groups. Have good connection with their hotel managers (Marriott). 
  • Marriott aids their transient and group segment. 
  • Not seeing an influx of lower rated groups, most of their focus on higher rated groups
  • Nashville market transformation is incredible, leisure and group demand continues to be very strong. Would consider adding more rooms in the future, but most likley as a standalone property instead of adding on to Opryland.  
  • Attrition spike not concern: reasons were group specific issues, smaller groups that were likely first term groups who underestimated costs etc., and finally there was a large group that had to shorten their stay due calendar shift. 
  • They conducted deep dive analysis on the group attrition and found no parallels to 2008 trends
  • Very little energy related group exposure, less than 5% of group is energy related. Continue to very bullish on the Dallas property due to visibility into 2016
  • Groups set new records for spend levels, outside the room spending levels at record levels, but still a lot of room to run for other clients 
  • Pharma, Tech, Financials make up the bulk of their business  
  • Not seeing fewer rooms booked relatively to meeting space booked. Meeting Planners continue to ask for more meeting space.  



Got Myopic Loss Aversion (MLA)? Why Your Smartphone May Be Killing Your Portfolio


Got Myopic Loss Aversion (MLA)? Why Your Smartphone May Be Killing Your Portfolio - km fbn


Hedgeye CEO Keith McCullough, JPMorgan strategist Anastasia Amoroso and FBN’s Jo Ling Kent and Dagen McDowell discuss whether stock market smartphone apps are negatively impacting your portfolio’s returns on Mornings with Maria.

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RTA Live: November 3, 2015



Retail Callouts (11/3): TIF E-comm Traffic, Retail Sales Trends, LB

Takeaway: TIF traffic trends decelerate in 3Q. Rare spike in both ICSC/Redbook, compares easy until Black Friday / Dec, which is what really matters.

TIF - E-comm Traffic Trends Decelerate in 3Q

TIF just closed the books on 3Q, and the traffic trends headed out of the quarter look particularly weak. E-commerce accounts for just 6% of total sales for the company -- but because the average ticket for TIF sits at $750 there is a lot less impulse and a lot more planning before a consumer slaps down a credit card and walks away with a blue box. The metric, which looks at the relative strength of an e-commerce site relative to the internet in aggregate takes into account two metrics (unique visitation and page visits per user), decelerated from +10% YY at the end of the 2nd quarter to -5% at the end of 3Q with marked softness throughout the quarter.

Not a good barometer for brand strength in 3Q, especially when the common perception seems to be that “just because Tiffany (TIF) blew up earlier this year, it can’t blow up again.” We disagree. It actually blew up twice this year. And we think there will be another. Next year's estimates are sitting at $4.54. We think an optimistic number is $4.25. If our Macro team's bearish call plays out according to plan, TIF will be lucky to earn $4.00.

With productivity, margins and returns all near 10-year highs, and the stock trading at 19x a number we don't think is doable, we still like this one on the short side.

Retail Callouts (11/3): TIF E-comm Traffic, Retail Sales Trends, LB - 11 3 2015 chart1


RETAIL sales Trends (ICSC / RedBook) - a rare spike in both indices, which happened on the same day LB put up a big comp (3Q at ~7% vs 5% expectations). On the heels of a lot of negative sentiment around retail, this offers up a 1-day reprieve. Note, however, that comps are very easy through most of November -- until Black Friday and December, which is what really matters.

Retail Callouts (11/3): TIF E-comm Traffic, Retail Sales Trends, LB - 11 3 2015 chart2

Retail Callouts (11/3): TIF E-comm Traffic, Retail Sales Trends, LB - 11 3 2015 chart3

Retail Callouts (11/3): TIF E-comm Traffic, Retail Sales Trends, LB - 11 3 2015 chart4


LB - L Brands Reports Oct. Comp #s, Takes Up 3Q Ahead Of Investor Day



DLTR - Dollar Tree completes sale of 330 Family Dollar stores to Sycamore Partners. Stores to be branded Dollar Express.



AMZN - Amazon bookstore opening in University Village.  The 5500 SqFt store will carry 5000-6000 titles.



AEO - American Eagle Outfitters acquiring Tailgate Clothing Company for $11mm, takes up 3Q guidance.



GNC - GNC expects to repurchase an additional $200mm shares by year end, raising guidance 2 cents to include the impact.



EBAY - eBay Enterprise Sold Off and Broken Up



99 Cents Only announced Felicia Thornton has been appointed as its CFO and treasurer



SHLD - Sears enters online home services market



BONT - Bon-Ton Stores Announces Extension of Private Label Credit Card Agreement With Alliance Data's Card Services Business



GCO - Genesco To Acquire Little Burgundy Chain From The Aldo Group



Sports Authority Launches New Fitness Training App



Selfridges Buys Arnotts Department Store in Dublin


CoreLogic HPI | Serial Overestimation

Takeaway: While the CoreLogic data continues to tell a story of accelerating HPI, another emergent trend is that of serial revisions & overestimation.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume. 


CoreLogic HPI | Serial Overestimation - Compendium 110315


Today's Focus: September CoreLogic Home Price Report


CoreLogic HPI:  Over the last year,  the CoreLogic HPI series – which has historically been the best, most real-time price series – has shown an alarming trend toward imprecision and overestimation.   


The 1st chart below shows the revisions to the Jul/Aug data.  Alongside the September release, August was revised lower by -150bps from +6.9% YoY to +5.4%. July, meanwhile, was revised lower for a second time with a revision of -70bps taking price growth down to +5.0% YoY.  Price growth in July was originally estimated at +6.9% YoY, so the collective revision of the last two months has brought that down by almost a full -200bps. 


And this revision pattern is not isolated to the September release – the serial overestimation in the original estimate followed subsequently by large-scale negative revisions has characterized the pattern every month YTD.   


The  revision is not inconsequential as it effectively (almost) changes the read-through.  Whereas the original estimate has reflected conspicuous acceleration and a positive read-through for housing related equities, the revision to flat-to-modest HPI carries a less bullish read-through for the complex.  In fact, the collective revision to July shows HPI decelerating modestly in the month and completely reverses the HPI-Equity Performance conclusion.


Further, historically, CoreLogic has been a very good lead indicator for the Case-Shiller HPI series, front-running the slope of HPI in Case-Shiller by 2-3 months. That lead indicator status has become increasingly suspect given the prevailing revision pattern. 


Inclusive of the apparent methodological flaw in the CoreLogic series, the three primary price series (CoreLogic, FHFA, Case-Shiller) continue to tell a largely congruous story of flat-to-modestly accelerating HPI.  We’re going to call CoreLogic to see if we can get some tangible underpinning for the serial overestimation in the data.  We’ll report back with anything of consequence.  



CoreLogic HPI | Serial Overestimation - HPI Revision


CoreLogic HPI | Serial Overestimation - HPI YoY   Ex Distressed TTM


CoreLogic HPI | Serial Overestimation - HPI YoY   TTM




About CoreLogic:

CoreLogic HPI incorporates more than 30 years worth of repeat sales transactions, representing more than 55 million observations sourced from CoreLogic's property information database. The CoreLogic HPI provides a multi-tier market evaluation based on price, time between sales, property type, loan type (conforming vs. nonconforming), and distressed sales. The CoreLogic HPI is a repeat-sales index that tracks increases and decreases in sales prices for the same homes over time, which provides a more accurate constant-quality view of pricing trends than basing analysis on all home sales. The CoreLogic HPI covers 6,208 ZIP codes (58 percent of total U.S. population), 572 Core Based Statistical Areas (85 percent of total U.S. population) and 1,027 counties (82 percent of total U.S. population) located in all 50 states and the District of Columbia."


Joshua Steiner, CFA


Christian B. Drake

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