Dashboard Capital Markets July 2023

Jul 3, 2023 | Dashboard, Restaurant Research

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Economic Outlook

  • As we recently discussed in our Soft Landing post, macro trends are generally looking up, with the major banks passing their stress test, the labor market hopefully headed for a soft landing and inflation cooling. If the Fed can chill out and the mayors of the big cities can keep things sufficiently habitable to avoid a run on commercial real estate, the U.S. economy might just get back to the business of prosperity.
Key Economics and Consumer Data Table

Capital Markets Commentary

  • Strength in QSR stocks is consistent with the idea that green shoots for an economic recovery are becoming apparent. This is especially true for fast food as consumer spending is rotating from goods to services currently.
  • CAVA Group, Inc.’s 6/21/23 IPO (Mediterranean fast-casual restaurant brand with 263 units) has been very well received by the Street.
FSR Stock Table
  • FSR stocks are outperforming QSR’s strong results as consumers pivot not just to services, but to a dining experience.
  • This trend is particularly notable with Dave & Buster’s which is well positioned to capture consumers trading down from more expensive vacations to “staycations” that include a trip to Dave & Buster’s.
QSR Stock Table

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2Q23 Retail Same Store Sales

NoBull’s Retail Same Store Sales Report benchmarks 80+ large consumer retail companies by domestic same store sales including annual (2019 – 2022) and quarterly results (2Q22 to 2Q23).

Walmart Investor Presentation: Inflation Here to Stay

While general merchandise prices are lower y/y, they remain elevated compared to 2 years ago. As Walmart does not believe general merchandise and food (dry grocery) & consumable prices are ever going to completely disinflate, management suggests the need for a country-wide wage increase rebalancing.

Interesting Conversation with Fed Chair Powell

Okay, Powell didn’t actually take our call, but we offer a transcript of a potential discussion between the Fed Chair and John Q. Public. It’s very insightful, so please read on.

The Problem with Investment Diversification

Every investment advisor and business student knows that portfolio diversification is key to wealth building. Show me an investor who can beat the S&P 500 Index by buying a few handpicked stocks and I will show you a hedge fund manager in the making. However, there is a huge problem with this strategy that no one is talking about.

Part 3: Analyzing Performance of Low-Income Oriented Retail Companies

We created an index for the financial performance of 5 low-income oriented retail companies to assess the health of this demo. While we recognize that these companies have benefited from the trade-down of higher-income consumers, things look reasonable at least through calendar 2Q23. 

Part 2: Incremental Interest Payments Squeeze Disposable Income

In this post, we quantify the pressure on disposable income driven by credit card & auto loan payment increases since the onset of the Fed rate hikes in early 2022 in addition to the impact of the coming resumption of student loan payments in October 2023.

Part 1: Keeping an Eye on the Consumer’s Top-Line

The consumer’s top-line benefits from a high employment rate, generous raises, and a healthy savings rate which indicates an income surplus.

Teenage Wasteland No More

The American youth (15 – 24-year-old) unemployment rate makes our country look downright productive compared to the rest of the world!

The Fight for Global Manufacturing Gets Personal

Post-covid U.S. exports of goods & services have skyrocketed as American companies have worked hard to onshore their supply chains, providing them with products to sell overseas. Correspondingly, U.S. imports from China have fallen considerably since late 2022 after China’s extended covid lockdowns left their American customers without product to sell.  

China’s Deflation Looks Pretty Good Compared to U.S. Inflation

While the U.S. has been suffering from severe post-covid inflation, China’s prices have been spiraling lower. What’s up with that?

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