Dashboard: Nov 2020

Dec 2, 2020 | Dashboard

Same Store Sales Trends

Challenge is to Maintain 3Q20 Momentum

  • 46% of the 28 public $1B+ restaurant chains reported positive comps as industry players continued adapting and innovating during 3Q20.

  • Average reported comp recovery continued into October.

  • Declining food-at-home prices (relative to food-away-from-home) is worth noting given lingering (but improving) unemployment compounded by heightened economic stress driven by increasing government restrictions.

Promotional Composition

Value Represented by Gift Card Bonuses & Free Delivery

  • Sharp increase in other value promotions reflects gift card bonus offers (with 38% of the $1B+ chains providing some form of bonus) and free delivery (23% offering free delivery in November vs. 16% in October).
  • In any case, average promotional price points remain elevated at a time when more value could be a beneficial response to lower grocery store prices.

Economic Outlook

4Q Economic Rebound Continues to Build Momentum

  • 4Q:20 GDP outlook improved to +11.1% from +2.2% last month according to the GDP Now forecast due to stronger than expected growth in real gross private domestic investment, real personal consumption expenditures and real residential investment growth (higher housing starts).
  • Renewed economic stimulus talks could help further bolster the economic outlook.

Key Cost Trends & Forecasts

Commodity Prices Accelerate

  • Commodity costs accelerated in November with the BLS Foodstuffs index jumping +10.8% y/y to its highest level since May 2018.
  • 8 out of RR’s 13 tracked commodities are up significantly higher on a YTD basis with veggies, chicken wings, and corn all at LTM highs.

  • Total job openings equaled or exceeded total separations in August and September.

Franchisee EBITDA Valuations

FSR Valuation Outlook Recovers From Lows

  • Franchisee EBITDA multiple outlook improved significantly for FSR as survey participants turned neutral from bearish.
    QSR valuations are still strong (especially Popeye’s, Wingstop, Checkers, Sonic & Papa John’s), but may face headwinds going forward as the industry returns to normal and dine-in restrictions eventually ease.

Stock Performance

RR Index Surges in Broad Based Rally

  • The RR Index surged +15.9% in November in a broad based rally fueled by high hopes for vaccine progress and renewed stimulus talks, propelling the hard hit FSR index +24% higher.

Marcus & Millichap Cap Rates

Spreads Normalize after October Surge

Marketing NFS Graphic Updated
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2Q23 Retail Same Store Sales

NoBull’s Retail Same Store Sales Report benchmarks 80+ large consumer retail companies by domestic same store sales including annual (2019 – 2022) and quarterly results (2Q22 to 2Q23).

Walmart Investor Presentation: Inflation Here to Stay

While general merchandise prices are lower y/y, they remain elevated compared to 2 years ago. As Walmart does not believe general merchandise and food (dry grocery) & consumable prices are ever going to completely disinflate, management suggests the need for a country-wide wage increase rebalancing.

Interesting Conversation with Fed Chair Powell

Okay, Powell didn’t actually take our call, but we offer a transcript of a potential discussion between the Fed Chair and John Q. Public. It’s very insightful, so please read on.

The Problem with Investment Diversification

Every investment advisor and business student knows that portfolio diversification is key to wealth building. Show me an investor who can beat the S&P 500 Index by buying a few handpicked stocks and I will show you a hedge fund manager in the making. However, there is a huge problem with this strategy that no one is talking about.

Part 3: Analyzing Performance of Low-Income Oriented Retail Companies

We created an index for the financial performance of 5 low-income oriented retail companies to assess the health of this demo. While we recognize that these companies have benefited from the trade-down of higher-income consumers, things look reasonable at least through calendar 2Q23. 

Part 2: Incremental Interest Payments Squeeze Disposable Income

In this post, we quantify the pressure on disposable income driven by credit card & auto loan payment increases since the onset of the Fed rate hikes in early 2022 in addition to the impact of the coming resumption of student loan payments in October 2023.

Part 1: Keeping an Eye on the Consumer’s Top-Line

The consumer’s top-line benefits from a high employment rate, generous raises, and a healthy savings rate which indicates an income surplus.

Teenage Wasteland No More

The American youth (15 – 24-year-old) unemployment rate makes our country look downright productive compared to the rest of the world!

The Fight for Global Manufacturing Gets Personal

Post-covid U.S. exports of goods & services have skyrocketed as American companies have worked hard to onshore their supply chains, providing them with products to sell overseas. Correspondingly, U.S. imports from China have fallen considerably since late 2022 after China’s extended covid lockdowns left their American customers without product to sell.  

China’s Deflation Looks Pretty Good Compared to U.S. Inflation

While the U.S. has been suffering from severe post-covid inflation, China’s prices have been spiraling lower. What’s up with that?

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