- China's stock market lost another -0.34% last night, taking the cummulative swan dive to -61% since the October 2007 highs.
"Trend" vs "Trade" factors aside, this is as flawed a business model as I've seen in a while.
I love this quote from SAFM’s senior management regarding the week leading into Labor Day “we came in Monday, and it was soft everywhere, very low demand for anything. You’d think they’d be hollering for wings, wings and chicken tenders for what we call the watering holes, where they serve beer and hot wings and chicken tenders…not much at retail and just kind of a blah week.”
In 1H08, fresh chicken wings accounted for 21.5% of BWLD’s restaurant cost of sales. In 2Q08, fresh wings were 20.4% of cost of sales. Despite SAFM’s macro comments, BWLD’s same-store sales have remained above industry trends. Above average sales trends and favorable wing pricing should fuel better margins in the near term. Over time, I would still expect chicken prices to move higher as chicken producers are forced to further cut production.
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Notice the tone from Famous Footwear management on performance by region on its 2Q call. Clearly lacking confidence about why certain markets are underperforming. The sad thing is that so many are saying the same thing in the same states. Famous Footwear's store adds in CA, NV, AZ, and FL are underperforming. Well guess what? Same thing goes for Payless, DSW and even Sports Authority. Dick's is adding stores in 3 out of 4 of these states too. Texas would be high on this list too if oil was not over $100.
I don't care what anybody tells me, but as too many retailers add stores in new states at the same time, it simply is not good. I think that the cycle shifting back to athletic footwear will support this for the athletic space, but for the casual/fashion footwear space this means trouble.
Although the sandwiches will not generate the same margins as a one-topping pizza, they should provide incremental business during the lunch daypart and add to the overall ticket. President of Domino's USA Patrick Doyle stated, "This launch springboards Domino's into the lunch business by providing a product that is high quality, priced right and aimed at convenience-minded people without a lot of time. Of course, sandwiches are also available any time our stores are open.”
In a sign of the times, as supply growth in the hedge fund industry finally begins to slow, and growing pains emerge, Byron Wien has moved to a hedge fund - Pequot Capital. He is their Chief Investment Strategist.
For those of you who missed Byron's interview in Barron's this weekend, it should be on your required reading list. I am not going to dissect why I disagree with two thirds of his current market views; it’s too late in the trading day, and I need to manage the close. I have long been a big fan of Wien's work, and he deserves all the respect our industry has given him.
That said, since Wein points out that the research business has reached a critical crossroad, I’d like to highlight one of the points he made that is indirectly aligned with my views of global macro risk management.
Barrons: "How do you compare this market with others you've seen in your career?"
Wien: "This market is different because globalization has changed the nature of investing. When I started as a securities analyst (1965), I was focused on U.S. equities alone, and I didn't know much about what was going on around the world, and I could do my job very well; today, you can't."
This business is Schumpeterian, on many levels. Creative destruction always allows someone to enter the game and do something that everyone else says "you can't" do.
I for one have lived my life for that very cause. It’s what gets my feet on the floor every morning. It's "Macro Time". Let's drop the puck and get this game started.
(Wien pictured recently in BusinessWeek)
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