CMG

Darden Struggling to Remain Relevant

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Restaurant group Darden (click ticker for report: ), owner of chains like LongHorn Steakhouse, Red Lobster, Olive Garden, and Yard House, warned that its second quarter results will be weaker than expected. Net operating earnings are expected to total $0.25-$0.26 per share, well below the consensus estimate of $0.46 per share, with $0.05 lost due to the acquisition of Yard House and one penny lost to Hurricane Sandy. Perhaps the most surprising portion of the announcement was the momentum we were seeing going into the quarter, particularly at Red Lobster and LongHorn. Olive Garden saw same-store sales fall 3.8% in September, 3.9% in October, and 2% in November, driven mostly by huge drops in traffic. Red Lobster, which had finally … Read more

McDonald’s Falling Prey to Competition

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Fast-food giant McDonald’s (click ticker for report: ) reported weak October same-store sales numbers Thursday. CEO Don Thompson continues to invite criticism as sales and profits have begun to fall since taking the reins from legendary CEO Jim Skinner. Global same-store sales fell 1.8% year-over-year, while global sales fell 0.8% (+0.6% ex-currency). Weakness was broad-based, with US same-store sales falling 2.2% year-over-year, Europe falling 2.2%, and Asia-Pacific, Middle East and Africa falling 2.4%. While we think Europe can be explained by overwhelmingly negative macroeconomic sentiment and lower price-points, we think the US is more of a company-specific issue. Competition in the US market was fairly dormant for the past several years, with Wendy’s (click ticker for report: ) and Burger … Read more

Panera Shrugs Off Uncertainty

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Healthy quick-serve chain Panera Bread (click ticker for report: ) reported fantastic third quarter results Wednesday afternoon. Revenue surged 17% year-over-year to $529 million, roughly in-line with consensus estimates. Earnings growth outpaced revenue, up 28% year-over-year to $1.24 per share, which was stronger than consensus expectations. The firm also raised its fourth quarter earnings outlook to $1.72 to $1.74 per share, which exceeds prior guidance as well as the consensus estimate of $1.70 per share. System-wide same-store sales increased 5.8% during the quarter, driven by 6.2% growth from company owned stores and 5.5% growth from franchise owned stores. Panera’s mix of healthy foods and a diverse menu continue to drive expansion, even while other high-fliers such as Chipotle (click ticker … Read more

Buffalo Wild Wings Suffers as Inflation Hurts the Bottom Line

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Fast growing restaurant chain Buffalo Wild Wings (click ticker for report: ) announced weak third quarter results Tuesday afternoon. Revenue grew 25% year-over-year to $247 million, but that figure was a bit lower than consensus estimates. Earnings fell 7% to $0.57 per share, a few cents lower than consensus expectations. The big drag on profitability has been wing prices, which are 70% higher than a year ago at $1.97 per pound. As a result, cost of sales jumped 270 basis points to 31.2%. Management noted that wing prices have remained high throughout the beginning of the fourth quarter, and profitability is expected to increase 15% year-over-year in 2013. CEO Sally Smith noted that non-alcoholic beverage sales are down—something we heard … Read more

Chipotle’s Growth Moderates

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Burrito chain Chipotle (click ticker for report: ) reported solid, but slowing, third quarter results Thursday afternoon. Revenue increased 18.5% year-over-year to $700.5 million, while earnings grew 19.5% year-over-year to $2.27, both slightly below consensus expectations. Though both growth rates are still impressive, the sequential slowdown in same-store sales indicates that the excitement surrounding new food offerings (Doritos tacos, its Cantina Bell menu) at Taco Bell (click ticker for report: ) are stealing the moment. Same-store sales grew 4.8% during the quarter, compared to 8% during the second quarter, and 12% during the first quarter. The firm doesn’t see things getting much better, forecasting mid-single-digit same-store sales growth during the fourth quarter, and flat-to-low single digits expansion during 2013. Management … Read more

Chipotle Issues Strong First-Quarter Performance; Shares are Extremely Expensive

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Chipotle () reported strong results after the close Thursday. Though the firm continues to post solid same-store-sales growth and has a nice earnings trajectory, we think the burrito-maker is one of the most overvalued companies on the market today. We continue to steer clear of the shares and may open a put position on the company in the portfolio of our Best Ideas Newsletter in coming periods. However, we’re waiting for the firm’s upward momentum to slow before betting on a price fall. In its first quarter, revenue advanced over 25% thanks to a better-than-expected 12.7% jump in comparable restaurant sales, which were bolstered by higher traffic and menu price increases implemented last year. The upscale burrito chain’s restaurant level … Read more