RESTAURANTS – SEASONAL AFFECTIVE DISORDER AFFECTING SOME MORE THAN OTHERS

Based on the two restaurant data points we got this morning from RT and BKC, we know weather had an impact in February.  BKC’s same-store sales trends for January and February seemed to be defined by the weather whereas RT’s fiscal 3Q comparable store sales continued to improve in spite of the weather.  BKC reported today that U.S. and Canada same-store sales declined 8.2% in the January/February timeframe versus a 3.1% comp in the same period last year.  This implies a significant deceleration in 2-year average trends from the prior quarter.  Management attributed 3% of the decline to severe weather, which it said impacted 75% of its system’s restaurants in this segment.

RT also cited that weather reduced same-store sales by 1.5% to 2%.  That being said, the company announced that its company comparable store sales for fiscal 3Q10 were -0.8% to -1.0%.  At the low end of the range, this implies a 235 bp improvement in 2-year average trends from the prior quarter.  RT stated that same-store sales were even slightly positive in January and February, “despite the worst weather in memory across many of [its] core markets.”  The divergence in trends for RT and BKC again highlights the continued outperformance by casual dining relative to QSR.  It also highlights that the weather impact is real, but that it can become more of an “excuse” for disappointing trends.   RT and BKC may not have the same geographic footprint, but BKC’s same-store sales trends deteriorated somewhat from the prior quarter even excluding the negative 3% impact from weather, which leads me to believe that weather was not the only factor to blame for softening results.

Howard Penney

Managing Director