Restaurant stocks showed considerable weakness to close out last week.
The important divergence between Quick Service and Full Service stocks during Friday’s trading was in the volume. While both groups traded down on the day, volume was lacking in QSR’s decline while casual dining stocks declined an average of -3.3% on strong volume.
We are headed into another important week for earnings with DIN, TXRH, PEET, DPZ, CPKI, MRT, MSSR and CEC all reporting. The coffee names all declined sharply on Friday with GMCR and PEET suffering two of the biggest declines among QSR on high volume. Coffee prices also showed strength, coincidentally or not, during Friday’s trading.
Last week, DRI’s presentation at the Barclay’s conference indicated that trends in April are slowing. As a result, I suspect as earnings are released this week the Q1 numbers will look strong but inflation is looming and slowing sales trends are not positively correlated to higher stock prices.