CHANGES TO THE BETS IDEA LISTS
We still believe EAT, TXRH, and DRI (LONG bias) will be strong performers in 2021, but that thesis is currently being challenged, slowing industry sales trends. On the flip side, it raises our conviction that shorts like CAKE and PLAY are headed lower. We are going to make some adjustments to our longs and shorts. We are going to elevate BLMN and DIN to the Best Idea SHORT list. And move SBUX from the SHORT bias to the LONG preference. It was hard not to be impressed with the company's adjustment during the pandemic, although its guidance for the current quarter might be slightly aggressive.
2021 has the potential to be very challenging for the QSR space has the industry begins to lap very aggressive increases in average check:
- MCD was running a 20% increase in average check and now is in the mid-teens
- JACK has seen its average check go from $8.68 to $10.52, up 21%
- WEN is up "double digits"
- SHAK had a 28% increase in average check during 2Q20
- SBUX had a 25% increase in average check during FY3Q20
As you can see in the Black Box trends below, this is the first week reporting a softening of the average check. Calendar 2Q21 will begin to see the real implications from the softening of the average check on sales and profitability.
SALES FOR WEEK ENDING NOVEMBER 29th
Same-store sales for the week were the worst experienced by the industry since mid-July. This marks three consecutive weeks where year over year sales growth has declined compared to the previous week.
Only quick service and fast-casual were able to achieve positive comp sales growth during the week. All other segments continue to experience negative comp sales growth
Comp traffic was also the worst results for the industry since mid-July.
Comp sales declined slightly more than traffic during the week, as growth in average spending per guest dropped during the week.
As a percentage of total restaurant sales, off-premise sales have been increasing again over the last three weeks, with the highest increases happening in full-service restaurants.
There has been a very sharp decrease in dine-in year over year sales growth for full-service restaurants in recent weeks. There has also been a drop in limited-service, but it has been much more moderate.
All eleven regions of the country had negative comp sales growth during the week.
The regions with the best comp sales results were the Southeast, Florida, Texas, and the Southwest. The weather seems to be a more significant factor in restaurant sales, primarily since many restaurants rely more on outdoor dining.
The regions with the most significant declines in sales during the Week were California, New England, the Western region, and New York-New Jersey. In California, the spike in COVID cases is likely the driving factor behind a steep drop in sales growth during the last two weeks.
