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While consumers are still spending, they are making careful choices & trade-offs appropriate for their households (reflecting increased debt levels & waning savings). 4QFY24 comp guidance call for a -3% to -7% y/y decline.
Lowe’s reported that the DIY customer became cautious during 3Q with particular weakness in appliances, décor, flooring, kitchen, and bath DIY categories as consumers pushed off bigger ticket purchases. For example, a customer who would have ordinarily purchased an entire kitchen suite may have purchased just a refrigerator.
Dollar Tree reported a challenging retail environment in which the compounding pressure of inflation, reduced government benefits, and depleted savings have negatively impacted lower-income consumers. The company has been fortunate to attract new customers with HH incomes of $125k+.
It is time for Americans to realize that the government needs some adult supervision over its budgeting process – before it is too late. We have a really good model in the corporate world that should be applied to the largest corporation in the world, the United States of America.
View Consumer Research Weekly Report for the week ending 12/1/23.
Marriott reported that consumers are seeking experiences more so than goods, whether that be music concerts, professional sports games, or youth athletics. While the desire for experiences was more prevalent among younger demos pre-covid, this trend now spans all generations according to data from its credit-card partners.
Home Depot reported that the worst of the inflationary environment is behind us and that retail prices are stabilizing with some prices settling at levels higher than 2022 & others settling lower.
Tyson reported that consumer demand for protein remains relatively stable and while its 4Q beef & chicken volume declined, volume for its Prepared Foods segment increased slightly (outperforming the majority of food & beverage peers which saw volume declines). Are consumers on a diet?
The Federal Government’s financial condition could be better! We are running annual spending deficits that are approaching $2 trillion (up from the CBO’s May 2023 estimates) which will add to outstanding debt which exceeded $32 trillion at the end of 2Q23. Our annual tax revenue is under $5 trillion, and it is estimated that higher rates mean that the government will incur $1 trillion in annual interest expense (representing 20% of the government’s revenue) also up from the CBO’s estimates. Hard asset investments like gold are looking good right about now…
The TJX Companies is the largest brick-and-mortar off-price retailer in the world which benefits from one of the most flexible business models in retail, allowing the company to buy close to need by quickly adjusting its store assortment to meet changing consumer preferences. A curated store mix appeals to shoppers across all income demographics & the company continues to attract an outsized number of Gen Z & millennial shoppers to its stores. Finally, TJX’s sales strength reflects a 20% to 60% price advantage compared to other retailers who have been increasing their prices.
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2024 plans call for deploying 7 – 9 Infinite Kitchens (automation capable of producing 500 bowls/hour) into new units & another 2 – 4 in retrofits.
Consumers have been resilient, but sentiment remains weak by historic standards, with many consumers feeling economically distressed & pessimistic, pressuring discretionary spending. However, sequential monthly traffic improvements during the quarter reflected investments to improve its guest experience & marketing investment to emphasize the chain’s strong value proposition across its dayparts.
Damien Sanders recently graduated college with an economics degree, and now he works at Restaurant Research LLC. However, he didn’t start out as a hot shot Analyst – rather, he cut his teeth working at Zaxby’s & Bojangles during college, learning many life lessons along the way. In this Q&A, Damien explains why the fast-food industry provides such a good launching pad for young people prepping for a career…
The restaurant franchise finance asset class currently benefits from strong unit-level sales and food cost deflation. Loan collateral has held up well generally speaking and the economy & capital markets are certainly stronger than the Great Recession that started around 2008. In this post, we conduct a Q&A with the head of a prominent franchise finance group & present some supporting data about why it may be time for lenders to jump back into the pool.
Jack reported strong results, indicating that it is still performing well with higher-income consumers & evenly across all other deciles of income. However, uncertainty remains as it relates to price elasticity in California given the need to hike menu prices in that market next year to address the AB1228 minimum wage hike to $20/hr.
We had never heard of BIGGBY® COFFEE until a team member’s spouse declared: “BIGGBY® COFFEE is going to be the next Starbucks!” Naturally, that got our attention as this is not something you hear every day. We pressed Julie our “source” – why would she say this about Biggby’s?
Wally just got back from Vegas where he attended the Restaurant Finance Monitor conference to escape the tyranny of raising his young children, get to a warm climate, shmooze, lose some money at the Casinos, and also take the pulse of the state of restaurant finance which he outlines in this post.
CAVA’s management attributed its astounding growth to the broad appeal & proven portability of its innovative Mediterranean concept which more than offset ongoing consumer headwinds. CAVA is creating & defining the next major cultural cuisine category with a substantial white space opportunity. Further, management suggested that online life has failed to replace the real-life emotional connections that humans crave as consumers seek restaurants that make them feel welcomed, warm & cared for.
Shake Shack’s 3Q sales began strong in July before moderating through the end of September. October sales reaccelerated with same-Shack sales increasing to over +3.5% (improving to flat traffic) despite transitioning from a high single-digit to a low single-digit menu price increase.
Since its 2019 IPO, Dutch Bros has increased its AUVs by +20% & opened 9 new states. The chain surpassed $1B in LTM system sales during 2Q22.