Impending rate hikes…
• 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.
Bubble Monitor 4/5/2022
Should currency be backed by gold? We will answer this age-old question which has become relevant because of Russia’s recent action.
RR Dashboard: Sales Catching-Up with the Consumer
• April RR Intent to Eat Out Index plunged -13.7% y/y due to difficult comparisons with April 2021 when consumers benefitted from $1,400/person government stimulus payments.
• The Food at Home (grocery stores) CPI expanded at its fastest rate in 40 years (+8.6% y/y during 2/22) – surpassing both the QSR and FSR CPI for the first time since 7/20.
• The price for regular gas increased +$0.70/gallon (+20%) to $4.22 compared to last month (+50% y/y) and represents the highest price ever.
RR Dashboard: Growing Disconnect Between Inflation & Sales
• 4Q21 comps for the $1B+ Chains increased +11.5% and +10.5% on a 2-year stacked basis (’21 vs. ’19), but is it sustainable?
• Investors piled into FSR stocks as mandates are lifted across the country while weak QSR performance reflects concerns about the impact of record inflation on lower income consumers.
• 1Q:22 GDP outlook was already flat before the Ukraine and oil price shock (crude up +43% YTD to $110 on 3/2) added further headwinds to an already fragile consumer.
RR Dashboard: Optimism Not Tempered by Inflation
• While sales are off to an optimistic start, it remains to be seen what impact higher menu prices will have.
• Consumer spending faces significant headwinds.
• Ramping inflation prospects aggravated by elevated transportation costs.
RR Dashboard: Sep 2021
• QSR Finally Ramps-up Value Amid Record Core Price Hikes
• Consumer Weakness + Inflation = Higher Value Mix
• Labor Issues and Difficult Comparisons Weigh on QSR
• Cap Rates Reach All-Time Low
RR Dashboard: Aug 2021
• 2Q Results Surpassed 2019 & Are Now Moderating
• Consumer Outlook Weakens
• More Franchisee Consolidation Expected in 2022
Dashboard: Mar 2021
• Strong April comp prospects reflect that RR’s Intent to Eat Out Index increased +17.4% y/y in March and an overlap over last year’s lockdown period will provide a favorable y/y comparison, especially for FSR.
• A +40% jump in the March BLS Foodstuffs index and sharply higher lumber prices could impact both COGS & development costs.
Dashboard: Feb 2021
• Preliminary 4Q:20 $1B+ Chains same store sales results were down -1.0% which is roughly in line with 3Q:20 results and reflects that October’s strength was mostly off-set by FSR weakness in November & December.
• 2021 sales have been improving due to: +14.4% January increase in disposable income ($600 stimulus checks); and easing dining restrictions. Going forward results should further benefit from another $1,400/person stimulus payment.
• Commodity costs escalated in February with several reaching LTM or multi-year highs.