NoBull Posts

How the Fed Can Help

How the Fed Can Help

Why doesn’t the Fed ensure the availability of affordable mortgages in order to support the residential real estate market?

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How to Start a Railroad Strike

How to Start a Railroad Strike

At first glance, rail shipments look terrible with carloads at their lowest level of the century – indicative of widely reported supply chain problems.

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RR Posts

Popeyes 2022

Popeyes 2022

While Popeyes enjoys a very strong brand positioning, even as sales moderate from its famous chicken sandwich spike, the current economic challenges for its core lower-income demo combined with huge chicken cost inflation represents a notable sales challenge for an unknown duration.

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Unit-Level Dashboard

Unit-Level Dashboard

• Comps must be interpreted through a prism of mid to high single digit menu price increases, suggesting QSR traffic losses while FSR benefits from an ongoing return to normal dine-in habits.
• The average price of food in the United States surged +10.4% in the 12 months ended June 2022 (+13.1% 2-yr. stack), the most since February 1981.
• Unit-level operating margins for the corporate owned stores of the publicly traded companies that have so far reported declined by -3.9% y/y during 2Q22.

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Applebees 2022

Applebees 2022

While Applebee’s solid turnaround is exemplified by its recent sales outperformance, it remains to be seen how well the brand’s core Middle American demo will fare given the current economic stress that is sure to prompt at least some QSR trade-down.

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Capital Markets Dashboard

Capital Markets Dashboard

• 2Q GDP decline of -0.9% represents the second consecutive quarterly contraction and is consistent with a slight +1% increase in personal consumption expenditures which is falling behind a supply shock driven +9% inflation rate.
• July’s restaurant stock performance suggests that investors called a bottom at the end of June.
• Unit-level buyers are increasingly wary of rising borrowing rates and deteriorating unit economics.

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Little Caesars

Little Caesars

While Little Caesars maybe the best at carryout, it remains challenged with the need to translate its fun menu and marketing into sustained traffic around its higher price points sufficient to increase unit level profits.

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Papa John’s

Papa John’s

Papa John’s is executing around a solid strategy of restoring its upscale positioning which, while working for now, may need to be tweaked towards value depending on the economy.

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Unit Economics

Unit Economics

• While AUV’s continue to benefit from the closure of underperforming stores over the last 2 years, significant 2022 sales headwinds reflect the need to pass along higher prices to consumers with less disposable income.
• The average 2021 unit-level EBITDAR margin for the $1B+ chains rebounded to just under the 2019 level as higher COGS were more than off-set by lower labor and operating costs, both of which benefitted from significant sales leverage.

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Capital Markets Dashboard

Capital Markets Dashboard

• What does stagflation look like?
• Given the economic backdrop, how do investors find the bottom for restaurant stocks?
• How low can the cap rate spread vs. the 10-yr. treasury go?

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Unit-Level Dashboard

Unit-Level Dashboard

• RR’s consumer survey (which measures intentions to eat-out over the next month) reveals a deteriorating sales outlook after showing signs of improvement during the previous 2 months.
• Both QSR & FSR operators are losing their grip on value as inflation continues to spiral out-of-control.
• According to government data, total net unit growth for the restaurant industry improved each quarter throughout 2021 (versus 2019).

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Domino’s

Domino’s extended record of sales outperformance is now threatened by a necessary move away from its core equities in the form of price certain value and fast delivery while it pivots towards carryout and higher prices.

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