Commentary
Restaurant stocks were down in February (similar to the S&P 500’s -2.7% decline) after a huge surge in January as investors see-saw in their opinion of the industry’s & economy’s direction. With the 4Q22 earnings season mostly complete, it seems to us that results were relatively encouraging, reflecting consumer resiliency, cooling inflation & the start of margin recovery. Many companies noted even stronger initial 1Q23 results which make February’s stock performance even more difficult to understand.
Please see short analyses of key 4Q22 restaurant company results here.
Notably, new forecasts from the Fed support the idea that the economy seems to be in relatively decent shape despite aggressive rate hikes which have done more damage to the housing market than the restaurant industry (so far). In particular, the Fed calls-out strength in the labor market which is a very good thing for the restaurant industry.
