NoBull Posts

What is a Dollar Worth?
The Federal Government’s financial condition could be better! We are running annual spending deficits that are approaching $2 trillion (up from the CBO’s May 2023 estimates) which will add to outstanding debt which exceeded $32 trillion at the end of 2Q23. Our annual tax revenue is under $5 trillion, and it is estimated that higher rates mean that the government will incur $1 trillion in annual interest expense (representing 20% of the government’s revenue) also up from the CBO’s estimates. Hard asset investments like gold are looking good right about now…

NoBull Releases 3Q23 Consumer Economic Dashboard
While the consumer continues to benefit from a high level of employment, healthy raises & some cost relief in the form of lower inflation & gas prices, significantly higher borrowing rates are driving an increase in credit card delinquencies & personal bankruptcies.

Walmart 3QFY24: Comps +4.9% Y/Y
Walmart is working hard to lower grocery prices to help ease holiday consumer pressure driven by: elevated food prices that are not deflating fast enough (particularly as it relates to very high meat prices); tightening bank credit; a return to pre-covid debt levels; & the resumption of student loan repayments which affects 27MM Americans. In any case, Walmart is encouraged by traffic trends which were strong & consistent throughout 3QFY24.

A Market Based Solutions to Land Disputes
Nobody wants wars! There must be a better way to settle land/territory disputes like we see in the Ukraine, Gaza & Taiwan. History shows that these disputes are almost always settled by military might which costs far more than just the price of armaments when the terrible loss of life & suffering is factored in. A market-based solution would be much better…

NoBull Inflation/Deflation Watch
Government data shows steady price pressure relief, particularly as evidenced by its PPI (wholesale) number which has been running negative since March 2023. This is consistent with 3Q reports from numerous consumer-facing companies, many of which benefit from margin-boosting commodity cost deflation. Time for a rate cut to help lower-income consumers!

eBay 3Q23: Gross Merchandise Volume -1% Y/Y in U.S., +4% International
eBay reported that continued challenges in the macro environment (including inflationary pressures & rising interest rates) continue to weigh on consumer confidence, pressuring demand for discretionary goods. Softening consumer trends so far in 4Q points to muted holiday season sales.

PFG 1QFY24: Current State of the Foodservice Distribution Industry
Performance Food Group believes it is very well positioned in the large & growing food away-from-home market with exposure across nearly all channels & product offerings. Management reported that the consumer remains resilient despite multiple years of above-average inflation, with PFG able to evolve & grow in a stable market.

Book Review: Know What Matters by Ron Shaich
We all know Ron Shaich as the founder of Panera Bread and one of the fathers of the fast-casual restaurant segment. In his tell-all book, Ron explains the processes that he followed to get there. Notably, it starts with an insatiable quest for improvement that fueled the transformation of a company along with an industry. These same lessons offer the hope of transforming an economy if we could all apply Ron’s simple wisdom that may be easy to understand, but hard to live by.

DoorDash 3Q23: Revenues +27.2% Y/Y, Adjusted EBITDA Up 3X
DoorDash reported that the addition of new retail verticals on its app appeals to consumers who are cross-shopping across categories. Half of DoorDash’s new customers start outside of restaurants, beginning instead with convenience, grocery, & alcohol delivery orders. Management further reported that “convenience begets more convenience” and that food is the most resilient & highest frequency category.

Sysco Fiscal 1Q24: U.S. Foodservice Sales +0.9% Y/Y, International Sales +12%
Sysco expects a return to normal levels of volume growth & inflation for the foodservice distribution industry. Management is confident that food-away-from-home will continue gaining market share from the grocery channel as it has for 24 of the last 25 years, except for 2020 (due to covid).
RR Posts

Emerging Chain Highlights: BIGGBY® COFFEE
We had never heard of BIGGBY® COFFEE until a team member’s spouse declared: “BIGGBY® COFFEE is going to be the next Starbucks!” Naturally, that got our attention as this is not something you hear every day. We pressed Julie our “source” – why would she say this about Biggby’s?

State of Restaurant Franchise Finance
Wally just got back from Vegas where he attended the Restaurant Finance Monitor conference to escape the tyranny of raising his young children, get to a warm climate, shmooze, lose some money at the Casinos, and also take the pulse of the state of restaurant finance which he outlines in this post.

Hardee’s 2023
Hardee’s, a regional chain which is generally oriented towards rural, lower-income markets in the Southeast & Midwest, is well known for its made from scratch biscuits (breakfast drives almost half of sales); 100% Angus charbroiled burgers; and hand-breaded chicken sandwich & tender options. While Hardee’s strategy is well conceived to leverage its core competencies, the chain remains challenged by its value equation and geographic market/demo positioning during a period of significant stress on lower-income consumers.

Del Taco 2023
Del Taco is the 2nd largest Mexican QSR, positioned around a wide variety of better-quality food (use of fresh ingredients represents a competitive distinction) offered for reasonable prices with convenient drive-thru access. While Del Taco enjoys strong concept fundamentals, the chain remains challenged to drive needed AUV growth especially at a time when its core low-income customers remain stressed by unfavorable economic conditions.

Franchise Composition Report
The average number of units operated by franchisees of the $1B+ Chains has increased from 5.4 in 2018 to 6.1 in 2022 which reflects the need for scale in the current high-cost operating environment.

Dashboard Capital Markets November 2023
During October, the S&P 500 declined -2.2% & the Russell 2000 (small caps) was down nearly -7%. The good news is that Bitcoin was up almost +30%! There is a lot to worry about given all the war mongering around the world, with a growing number of hotspots that adds the Middle East to the Ukraine & Taiwan. There is also growing consternation about the porous U.S. southern border and we got a new Speaker of the House who has got right to work on lining-up billions to ship overseas. Did we forget to mention that the 10-year yield made a big move higher during October & actually had the temerity to test the forbidden 5% red line.

Subway 2023
Subway is the largest sub sandwich chain by far with an ad budget larger by multiples than the other sub chains and continues to make progress with its current brand repositioning. However, while Subway is working hard to improve its relevancy in a crowded field, the chain has a lot of work to recover 20%+ of domestic sales market share lost over the last 10 years to the $1B+ chains.

Dashboard Capital Markets October 2023
Recent restaurant stock weakness reflects investor concern about slowing industry traffic & increasing consumer weakness, points recently addressed by General Mills.

Denny’s 2023
Denny’s unique “America’s Diner” brand positioning provides the promise of everyday value with craveable, comfort food served around the clock in a friendly and welcoming atmosphere. While Denny’s management team is executing well around a very solid strategy, the chain remains challenged to drive needed AUV growth especially at a time when its core low-income customers remain stressed by unfavorable economic conditions.

Buffalo Wild Wings 2023
Buffalo Wild Wings enjoys a unique positioning as the largest sports bar brand (4th largest casual chain) which is famous for its wings flavored with 26 B-Dub sauces & seasonings in ascending order of heat. While BWW enjoys considerable brand equity as the largest and perhaps most iconic sports bar chain, there remains more work to convince young sports fans that the chain’s dining experience is worth the price premium over Wingstop delivery.