prev

OLYMPIC PRICE POINTS

For the casual dining operators, Applebee’s and Outback, they are using a $9.95 price point to drive traffic. I can understand the $9.95 price point for Applebee’s, but for Outback it appears like a desperate move.
  • The last I checked Outback’s average check was over $20. How is this good news for profitability?
Outback’s newest promotion
Applebee's newest promotion

JUNE WASN’T GOOD, DESPITE THE STOCK ACTION

The violence continues. Gaming stocks are moving at double digit rates, this time higher. The State of Nevada reported June Strip revenues down 3%, sparking a massive rally in casino stocks. Expectations were apparently much lower. I’d like to caution investors with the following points:

• Companies already reported Q2 EPS

• An accounting quirk shifted $11m of May’s slot revenue into June. The Strip would’ve declined by 5% excluding this shift.

• Strip gaming revenue for the major casinos (over $72m in annual revs) actually fell by 7%.

• Strip slot volume (coin in, drop, handle etc.) actually fell by 9%. Casinos either tightened their machines considerably (consumers will figure that out) or they played lucky

We view slot volume as the relevant metric to be gleaned out of the monthly reports. The trend there is not good as depicted in the chart; negative since October 2007. Slot revenue only ticked higher in June on the higher hold percentage.

If anything, trends are bad and likely worsening. You wouldn’t know it by the stock action.


Don't be fooled by June's slot revenue increase

I SOLD MY SPY (S&P 500)

We recently launched our "Hedgeye Portfolio" as a beta test. All of my security level decisions are time stamped there for accountability purposes.

We think this will solve for the #1 issue that the Street struggles with in paying for research - timing. I sold the trading position I have in the S&P 500 (SPY) at $131.32 today (that's and S&P 500 level of roughly 1312).
KM

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 78.61%

No Medals For The Italians Here...

On Friday, Italy, the world’s 7th largest economy (3rd largest in the EU), printed GDP numbers for the second quarter that were down -0.28% from Q1; today’s CPI numbers came in holding on at the 6 year high of 4% reported last month.

For context, here's a longer term chart overlaying these two economic factors. There are no medals being handed out here to the Italians.

Andrew Barber
Director

YOUNG ADULT PER CAPITA MEAL & SNACK OCCASIONS ARE DECLINING

Many restaurant operators expend considerable energy to satisfy the needs of the young adult market, and rightly so. Teenagers and young adults, 18-24 years of age, are the life blood of the QSR industry. Most restaurant operators find young adults a critical segment of the population because they are among the heaviest users of restaurants.

Recent date published by NPD shows this group has been scaling back on their restaurant use over the past few years, with the decline from 2007 to 2008 being quite striking. In 2005, consumers 18-24 years of age visited restaurants, on average, 265 times per year. In 2008, that number dropped to 240. From the peak this is a significant shift in restaurant trends. While restaurant use overall has slipped a bit, no other age group has scaled back to the extent young adults have.

While they are a relatively small group in terms of population, 18-24 year olds are responsible for a sizeable number of industry visits. For the year ending June ’08, young adults 18-24 accounted for nearly seven billion visits to commercial restaurants and spent $42 billion dollars, according to CREST. The vast majority of their spending is at Quick Service Restaurants, while full service restaurants receive a fair amount of their spending too.

Offsetting the decline in per capita usage has been growth in the number of 18-24 year old population. Growth in the 18-24 year olds peaks in 2008 and 2009 at 1.2% and by 2013 the numbers begin to decline. Over the next few years, as growth in this critical demographic slows, restaurant operators will be looking for market share gains from a smaller pie.

MCD – RAISING PRICES AROUND THE WORLD TO PROTECT MARGINS!

Speaking to the press in Japan, Eiko Harada Chairman and President of McDonald's Co. (Japan), said "rising food prices will force McDonald’s to raise prices for the second time this year. We'd like to implement it (the price hike) as soon as possible"

According to Mainichi Daily news, McDonald’s will rise by less than 5%, as the cost of purchasing meat, bread, potatoes and other ingredients is expected to increase by about 10 billion yen during fiscal 2008.

investing ideas

Risk Managed Long Term Investing for Pros

Hedgeye CEO Keith McCullough handpicks the “best of the best” long and short ideas delivered to him by our team of over 30 research analysts across myriad sectors.

next