Restaurants yesterday did not show much broad-based strength with decliners outnumbering advancers.
After last week’s earnings-driven run in restaurant stocks, it will be interesting to see how this week unfolds. Today we have BWLD, PEET, KONA, and PNRA all reporting their 1Q10 earnings. All of these names traded down on weak volume except KONA, which outperformed all of its peers as it has done for the last 30 days. Also this week, PF Chang’s, Burger King, and Ruth’s Chris are reporting over the next few days.
In terms of costs, expectations for a surge in meat prices are growing. A Bloomberg article yesterday outlined the factors behind this expectation. Supplies of beef, pork, and poultry are estimated to be the lowest since 1997 due to the surging cost of feed forcing farmers to reduce herd sizes. Given the high levels of unemployment, this rising cost being passed on to consumers could lead to further value-seeking for those visiting restaurants at a time when restaurant stocks are at near-record levels.
Howard Penney
Managing Director
