Finally, Some Improving Trends for the Restaurant Space
It looks like we may get the promised “soft landing” for the restaurant industry as employed consumers continue to have some money to spend while restaurant operators are poised to enjoy some well-deserved margin relief.
- Economic conditions look generally positive, marked by a strong job market with healthy disposable income growth to go with lower interest rates, lower gas prices, and moderating inflation.
- However, rents remain a problem and we note stress among sub-prime (low-income) borrowers as reported by Equifax in this post (particularly as it relates to sub-prime car loans).
- Recent reporting from McDonalds, Chipotle, Domino’s & BJ’s Restaurants reinforce these points.
Capital Markets Outlook
- The theme of a healthy consumer (augmented by the prospect of recovering 2023 store-level margins as commodity costs moderate & menu price increases stick) is reinforced by QSR stock performance during April, with the median QSR stock up nearly +8% and over +11% for the YTD period through April 28, 2023.
- FSR stocks did not fare as well in April as investors decided to take some of their substantial YTD profits off the table to rotate into a rebounding QSR sector.