Restaurant Research’s Capital Markets Dashboard for April 2024

Apr 1, 2024 | Dashboard, Restaurant Research

While the market continued to exhibit irrational exuberance during March, restaurant stock performance was more grounded in macro-economic realities.

Overall Market Performance

  • March 2024 stock market performance was extremely strong across almost every asset class, but particularly as it relates to Bitcoin which continued to sky rocket for reasons outlined last month.
  • The “risk on” trade doesn’t seem to have a readily apparent fundamental explanation as there is no indication that the Fed is ready to cut rates any time soon (Powell is likely to wait as long as possible before November’s election). Resultantly, the economy continues to struggle as the Fed’s high interest rates plague the lower-income demo, and in turn, corporate earnings are ok, but not great.

Asset Class Performances

QSR Stock Performance

  • Fast food stock performance was more in-line with macro conditions as evident by bellwether McDonald’s -4.5% y/y decline during March. In any case, we continue to see those QSR stocks with above-trend growth prospects being richly rewarded in an otherwise slow growth environment.    
  • While strong stock performance included the smaller, fast growth chains with healthy halos (like Sweetgreen & Cava) it is interesting to note that it also included chains offering indulgent treats including Krispy Kreme (which just announced a distribution arrangement with McDonald’s) & Domino’s which looks like the beginning of a turnaround story.

QSR Stocks Performances

FSR Stock Performance

  • It is notable that higher-end sit down restaurant stocks outperformed QSR during March which would suggest that investors are expecting an economic rebound to drive a consumer trade-up from fast food.
  • In any case, Darden’s recent reporting for its quarter ended 2/25/24 would suggest that the casual dining segment is not currently doing as well as could be hoped.
  • Darden’s blended -1% comp during 3QFY24 reflected: a -1.8% decline at Olive Garden; a +2.3% increase at Longhorn Steakhouse; and a -2.3% decline at its Fine Dining restaurants. Notably, the company reported that its comps outperformed the industry during its quarter by +3.2% while its traffic outperformed by +2.7%.
  • Darden further reported that transactions from households with incomes +$150k were higher than last year while transactions from incomes <$75k were much lower than last year, and at every brand, transactions fell from incomes <$50k.

FSR Stocks Performance

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