Bloomin’ Brands 3Q revenue increased +4.5% y/y with a slow start for the quarter due to a stimulus “hangover” before recovering later in the quarter. A +7.3% menu price increase was not enough to cover inflation which was up +13% for the quarter as corporate recognized its need to be mindful of its customers’ need for value. Management reported that beef, which represents 40% of its food basket, is expected to be inflationary next year because of supply constraints. Utilities represent another big source of inflation because of oil prices. Overall, 2023 inflation is expected to increase mid to high-single-digits. On a bright spot, corporate reported that 77% of its total off-premise sales were through digital channels (its new app already has 2MM downloads).
Texas Roadhouse reported a +8.2% y/y increase in same-store-sales during the quarter (August & September benefited from strong guest demand) which reflected a +0.5% y/y increase in in traffic (including a +3.3% increase in dine-in traffic) along with a +2.9% menu price increase and a shift in product mix to higher priced menu items. Texas Roadhouse’s guests are generally older & wealthier, and this demo is more resilient to economic pressures, explaining their trade-up to more expensive menu items. To-Go sales mix was 12.6% and a labor dollars per store week increase of +8.6% was driven by wage and other labor inflation of +7.7% and growth in hours of +1.8%. 2023 wage inflation is expected to increase +5% to +6%, with upcoming state-mandated increases representing nearly +2% of this increase. 2023 food cost inflation is also expected to increase +5% to +6%, mostly driven by beef but also by other inflationary pressures which include credit card charges (more usage), utilities and repairs & maintenance.
The Cheesecake Factory’s comps increased +1.1% during the third quarter after raising menu prices by +6%. Notably, the chain’s main demographic is represented by young people who have been pressured by gas inflation. For this reason, management directly correlates its sales performance to the price of gas. In any case, Cheesecake’s menu depth & value equation represents a point of competitive distinction with price points varying from $8 up to low-$30s for steak (which compares favorably with other steakhouses).
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