NoBull Posts

Noblesse Oblige for the Masses

Noblesse Oblige for the Masses

A healthy society is marked both by a reasonable distribution of wealth along with an investment focus on productive assets that can help all of society. An unhealthy society is marked by a concentration of wealth in the hands of a few who are focused on preserving their ability to purchase self-indulgent pleasures.

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Potential New Home Buyers Seem to be Conserving Cash for Necessities

Potential New Home Buyers Seem to be Conserving Cash for Necessities

KB Home’s 4Q22 results exemplify the impact of depressed consumer confidence levels as evidenced by a sharp pull-back of potential new home orders from first-time buyers that largely have the financial means to complete the transactions (even with elevated mortgage rates). While KB is working hard not to discount its inventory to drive 1Q23 sales, this pullback certainly will have mid-term implications if confidence levels don’t begin to rebound soon.

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Performance Food Group (PFG) Investor Presentation – January 2023

Performance Food Group (PFG) Investor Presentation – January 2023

For some time, the market has been held captive to the Fed’s interest rate hikes and prospects about future actions to fight runaway inflation. Further, the Fed has been telling us that labor costs represent the main inflation culprit. However, comments from a recent PFG investor presentation reveal that the real cause of labor inflation is not something that interest rate hikes can solve.

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Small Businesses Are the Lifeblood of Economic Growth

Small Businesses Are the Lifeblood of Economic Growth

Policymakers need to protect and encourage small businesses because of the critical role they play in driving growth during tough economic times. While consolidation may sustain margins and large companies during downturns, the economy needs to grow its way out of our current problems.

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Are We in an Earnings Recession?

Are We in an Earnings Recession?

Recessions are typically defined by macroeconomic metrics like GDP & unemployment, data that relates to consumers. However, little attention has been dedicated to analyzing whether we are in a corporate profit recession. Fortunately, Corporate America is in pretty good shape – at least through 3Q22.

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Darden Doing Swell Without Discount Seekers

Darden Doing Swell Without Discount Seekers

Management reported: a spending shift from durable household goods to leisure services, benefitting the restaurant industry; the high-end consumer is doing well & while <$50k consumers have been a little soft over the last 6 months, Darden’s mix from this demo is still above pre-covid levels; and as the <$50,000 demo includes singles & retirees living in multigenerational households, lower-income consumers are in better shape than they appear.

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How to Improve Your Odds in the Biggest Casino on Earth

How to Improve Your Odds in the Biggest Casino on Earth

While stock investments can be very lucrative over the very long-term, everything depends on the timing of your exit. Also, success depends on your ability to stand steady when the sky is falling all around you. Of course, past averages do not guarantee future performance…

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RR Posts

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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3Q Investor Calls & Same Store Sales

3Q Investor Calls & Same Store Sales

Total restaurant industry sales growth of +11.2% outperformed food at home (grocery) sales growth of +8.1% during 3Q which at least partially reflects significantly higher food at home CPI (+13.2% vs. +8.0% food away from home).

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Wingstop 2022

Wingstop 2022

While Wingstop enjoys strong positioning and adept execution around an extremely popular menu item (propelling the chain into the big league), its progress is dependent on mitigating volatile wing costs which is key given the brand’s orientation towards a lower-income demo in a challenging macro environment.

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Hardee’s 2022

Hardee’s 2022

While Hardee’s has improved its relevancy around its brand positioning, the need to strengthen its value positioning may still be required to drive its top and bottom lines.

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Menu & Promotions 2022

Menu & Promotions 2022

Menu & Promotions report provides data for 58 chains including total menu items, promotional mix, new product, average check, daypart and off-premise mix.

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Buffalo Wild Wings 2022

Buffalo Wild Wings 2022

BWW is famous for its wings flavored with 24 sauces & seasonings in ascending order of heat and enjoys considerable brand equity as the largest and perhaps most iconic sports bar chain with a positioning that currently benefits from manageable wing prices.

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No Bull Economics
Restaurant Research

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Traffic as a Gauge of Consumer Strength

Investors should be struggling to decide whether the economy is entering a recession, consistent with the base case for McDonald’s 2023 business plan. However, judging by the market’s recent performance, it appears that investors are already celebrating a soft landing. But before drawing that conclusion, we need better insight into retail traffic trends which, at first blush, have been depressingly negative.

Why are Builders Focused on Developing Multi-Family Apartments?

While traditional homeownership has long been a staple of the US economy, shrinking household size & long-term economic pressures are changing housing preferences. This trend has important implications for the future spending patterns of consumers who are less likely to be house poor. 

Flat to Modest Rent Growth is Expected for 2023

It appears that more Americans are moving back in with family or roommates (or delaying striking out on their own) after a prolonged period of skyrocketing rent growth aggravated by broad-based inflation, according to ApartmentList.com. Now rents are falling fast.

Have Delivery Fees Taken a Bite Out of Restaurant Industry Sales?

Delivery fees are not cheap & can represent multiples of the menu item price. Although there is an argument to be made that delivery marketplaces can expand a restaurant’s marketing reach, there is a price to be paid in terms of industry sales cannibalization

Lockdowns Tipped the Balance of Power to Employees in Low-Cost Cities

Why has consumer spending held up so well during a period of huge and punishing inflation? As it turns out, the long-term impact of the covid lockdowns was most notable for the lowest income demo who saw their hourly wages increase the most relative to all other earners. While this momentum is slowing, this development continues to have important implications for inflation prospects and the start of the 4Q22 corporate earnings season.

What’s up with Egg Prices?

How does a -3% decline in table-egg production translate into December’s 2x+ egg price increase? That’s a good question for someone…

Could Retail Traffic Declines be Attributed to Excess Mortality Rates?

Traffic declines across the board in both restaurants and grocery stores suggest fewer people eating. The shocking statistic is that 2021 life insurance payouts were much higher for group plans typically associated with young, healthy corporate employees relative to individual policyholders. 

Farmers Need More of the Profit Pie to Fund Needed Capacity Increases

The farmer’s share of a $1 food purchase has been steadily decreasing to just 14.5% of the total, according to USDA data. This provides a compelling clue about why food production has been strained, and correspondingly, why food cost inflation is out of control.

Did Investors Forget about December’s Bomb Cyclone?

December’s preliminary retail sales release spooked investors who smell a recession. Normally, this would be a boost to stocks because of expectations that the Fed might start to adopt a more dovish stance. However, this represents the first time that investors have finally come to believe that Powell & company intend to keep interest rates inflated, even if hell freezes over. 

The Middle Class is Losing Share Post-Covid

A strong middle class is critical to a healthy economy as this cohort spends a larger portion of their income (relative to the rich) on goods & services that drive growth. 

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