Dashboard

Dashboard: Capital Markets

Dashboard: Capital Markets

Bullish investors’ sentiment towards restaurant stocks during January reflects an outlook for continued consumer resiliency and moderating costs. Notably, this seems somewhat contrary to McDonald’s base case for a mild to moderate recession this year.

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Dashboard: Unit Level

Dashboard: Unit Level

After a ruinous 2022 in terms of food cost inflation, moderating 2023 inflationary prospects will still leave food input costs at extremely elevated levels. Fortunately, moderating labor costs suggest that restaurants will not have to pass along as much pricing in 2023 to restore margins. Also, it is notable that restaurant sales benefit from more discipline in terms of price increases relative to the grocery stores.

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Dashboard: Unit Level

Dashboard: Unit Level

Despite healthy comp growth prospects, unit-level P&Ls remain pressured by substantial food cost inflation (and labor inflation to a lesser extent).

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Dashboard: Capital Markets

Dashboard: Capital Markets

Waning consumer strength in an inflationary environment does not portend well for restaurant stocks or unit-level valuations, especially as the Fed remains focused on increasing unemployment.

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Unit Level Dashboard – 8/22

Unit Level Dashboard – 8/22

• While 2Q comps for the $1B+ Chains increased +3.5% (+14% 3-yr. stack), RR’s consumer survey (which measures intentions to eat-out over the next month) continues to reveal a challenging 3Q sales outlook.
• Food prices continue to surge, breaking another record in July (+10.9% y/y & +14.8% 2-yr. stack).
• Recent passage of the California Fast Food Accountability & Standards Recovery Act increases QSR wages in the state by +40% to $22/hr. in 2023, aggravating labor inflation.
• Unit-level operating margins for the corporate owned stores of the publicly traded $1B+ Chain companies declined 4.5% to 16.5% during 2Q:22 vs. 2Q:21.

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