WEN

Examining Same-Store Sales in the Restaurant Industry

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Key Takeaways September 2016 marked the fourth consecutive month of same-store restaurant sales declines, but the pressure is not indiscriminant. Millennials account for nearly a quarter of restaurant spending and are anticipated to account for 40% of restaurant purchases by 2020. Their preferences are becoming important considerations for the strategic planning of restaurants. Fast food restaurants with exposure to the coffee and breakfast segments appear to be faring better than those with limited or no exposure to the segments. Experiential dining is becoming increasingly important in the full-service arena as the gap between grocery prices and food away from home prices has widened of late.     By Kris Rosemann The broader restaurant sector (BITE) has been under pressure as of … Read more

Retail Weakness: Blame the Election?

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Image Source: DonkeyHotey By Kris Rosemann The 2016 election cycle has been one characterized by unprecedented amounts of criticism and accusations, of both the personal and political variety, and it may be true that the perceived political environment from the view of the general public has not been in such a state of uncertainty for some time. Let’s not get into the details of who called whom what in last night’s Presidential debate, but some parents were reportedly not allowing their children to watch the debate out of fear that their values or outlook on democracy could be skewed. But could the uncertainty surrounding the election actually be enough to impact consumer activity at retail outlets and restaurants? Some are … Read more

Restaurant Traffic – What’s Going On?

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By Kris Rosemann What’s going on with restaurant stocks these days?  Sonic’s (SONC) announcement of preliminary results for the fiscal fourth quarter of 2016, ended August 31, has been the latest catalyst to drag the restaurant sector (BITE) lower due to it reporting “lower-than-expected traffic, reflecting lower consumer spending in restaurants and continued aggressive competitive activity.” Our newsletter portfolios have not been spared the pain as shares of Dividend Growth Newsletter portfolio holding Cracker Barrel (CBRL) have faced pressure since its fiscal fourth quarter report September 14, and Best Ideas Newsletter portfolio holding Buffalo Wild Wings (BWLD) has suffered as a result of the weak data as well. Sonic’s report was not the first we’ve been hearing of slowing consumer … Read more

Chipotle Fourth Quarter Comps Suffer Greatly; Could Qdoba Be the One to Eat Chipotle’s Lunch?

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Chipotle’s (CMG) operating performance has come under tremendous pressure in recent months due to a number of reports linking illness in customers to its restaurants. At first, we thought the situation would be relatively contained to just a few dozen instances of sickened customers, but more concerns have come to light since we last commented on the topic. The media is having a field day. Can a company that prides itself on “Food with Integrity” endure, and why so many different causes of illness, from E. coli to salmonella to the norovirus? Could these events mark the beginning of the end of the burrito-making giant’s growth prospects, or is the bad press just a hiccup of indigestion, soon to be … Read more

10 Bucks per Hour; What It Really Means

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Source: US Department of Labor, Walmart Walmart (WMT) is quite savvy. The big box retailer announced February 19 it would raise the minimum wage for all of its US workers to $9 per hour in April of this year and at least $10 per hour by next February. The move comes amid ongoing public scrutiny of its labor practices, elevated worker turnover, and general malaise among the ranks on social media platforms. At face value, the news headlines show Walmart caving to public pressure, and a win for big labor, but in reality, the retailing giant is merely doing what good businesses do – pleasing customers (which are its workers, too) and widening its economic moat. Hiking wages accomplishes both. … Read more

No Interest Rate Hikes Soon, As Expected

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It wasn’t surprising to read in the FOMC minutes that the Federal Reserve is in no hurry to increase the federal funds rate. The prices of almost every commodity from crude oil and refined energy products to iron ore and copper have fallen sharply in recent months, and the strengthening of the US dollar has only accelerated the declines of dollar-denominated commodities for US-centric operators.  While we remain encouraged by the ongoing recovery in the construction and housing markets, pockets of weakness remain, and housing prices have yet to fully recover to pre-crisis levels in many parts of the country. Food prices are dropping, too – can you believe that 10 chicken nuggets at Burger King (QSR) cost a measly $1.49? There … Read more

Holy Guacamole! McDonald’s Wishing It Had Kept Chipotle

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Very few investors probably remember that Chipotle (CMG) used to be owned in part by McDonald’s (MCD). McDonald’s had originally taken a stake in Chipotle in February 1998, when Chipotle had but 14 restaurants in Denver. The maker of the Big Mac would go on to own 90% of the subsidiary and eventually spin it off in an initial public offering in January 2006. McDonald’s would receive ~$1.5 billion from the sale, but with Chipotle’s market capitalization now at over $20 billion, it’s clear the burger-and-fries behemoth exited way too early. The most recently-reported results by both restaurants tell the diverging story quite well. McDonald’s reported relatively disappointing second-quarter results Tuesday. The performance can best be described as flat. Global … Read more

Valuentum Economic Castleâ„¢ Rating Update

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Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Restaurant Industry Update

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The fast-food (quick-service) breakfast wars have intensified. It has become a high-stakes game for all participants, and most have gone all-in to capture market share, to use poker parlance. The NPD Group, a leading global information firm, noted that the pace of expansion for fast-food breakfast across the restaurant industry has been a key bright spot, and executives across the industry are taking note: Quick service, which accounts for about 80 percent of total restaurant morning meals, showed the strongest increase in breakfast visits of all restaurant segments with a 4 percent increase in the year ending December 2013 period compared to year ago, reports NPD CREST, which every day tracks how consumers use restaurants and other foodservice outlets. Morning … Read more