- NPD data point to a significant increase in the number of visits driven by deals within the QSR segment, particularly the hamburger segment (which includes BKC, MCD, WEN, etc), and based on recent menu introductions, we will continue to see the QSR segment chase less profitable traffic growth.
- Other recently announced QSR promotions and added menu items at lower price points:
Nation’s Restaurant News reported yesterday that 400 Wendy’s units in Florida will give away coupons for more than a million free Double Stack hamburgers on Labor Day. For reference, the Double Stack typically sells for $0.99 on the company’s value menu and is made with two hamburger patties, cheese, onions and pickles. At $0.99, this menu item is already cutting into margins, and now the company is giving them away for free!
- Earlier this week, Jack in the Box introduced its Pita Snacks, a new product platform of snack-sized, wrap-style sandwiches, which will be offered at $1.99.
• Though traffic was down 5.2%, and total comps down 2.9%, athletic comps were +1.3%.
• Nike, New Balance, Reebok and Puma all stand-outs.
• No mention of Skechers.
• Skate doing especially well.
• Fashion and juniors down.
• Will be shifting more inventory to Athletic
• California, Nevada, Arizona and Florida all the most troubling markets. Ironically, Dick’s and/or Sports Authority are adding stores in all of them.
The US$ has recovered alongside the US stock market this month. Gas pump prices have fallen alongside oil's decline. But every week the ABC/Washington Post Consumer Confidence reading shows no dice. No change.
At a -50 weekly reading, all time lows remain reality in Main Street confidence. Two Americas remain as a result. Get used to Obama's attack dog Democrats reminding Wall Street of the same.
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Why do global macro investors care about Spain's GDP? Well, for starters, it's still the 8th largest economy in the world. It's also one of the country's who levered up their balance sheet aggressively to the asset leverage cycle.
(chart by Andrew Barber, Director, Research Edge LLC)
Here’s a lesson about what not to do in retail. 1) Get over confident in your brand and market positioning. 2) Allocate capital accordingly – including on expensive real estate. 3) Ignore the macro headwinds coming and the change in behavior likely to be seen as competitors get increasingly desperate. 4) When comp plans start to miss, jam more product into the stores to drive revenue.
This, unfortunately, is J Crew. It was Gap as well (both Mickey Drexler). Not to unfairly single him out – this has been the case for many a retailer that doesn’t do macro analysis in planning their respective businesses.
Where does this leave JCG now? In a bad bad spot. Take the quarter, for example. Comps were flattish, and 10% revenue growth was almost entirely driven by square footage. Revenue is trending down steadily on a 1, 2 and 3-year run rate. Gross margins, however, took a sharp dog leg down – the greatest since 2004. When this happens, we should expect inventories to end clean, right? Not with JCG. Even with margins down meaningfully, inventory was up 25% at quarter end.
This is when our sales/inventory/margin map tells a frightening story. Check it out below. One might think that any move from where it is today is a positive one (i.e., things can only get better, right?). Not true. It is possible for JCG to own that lower left quadrant for several more quarters to come. Management’s current guidance does not suggest that this is the plan.
The US Dollar Index looks like it runs out of runway at the 77.80 level. Commodity prices are moving into positive buy signal territory using very short duration momentum models, ostensibly as a leading indicator of a “Trade” down in the US$.
If Bernanke keeps the easy money card on the table. I don't see why one last hurrah for the commodity bulls can't happen.
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