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Proprietary Data Insights Top Surging Restaurant Stocks Week Over Week
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Source: Google Finance What do the two tickers with the biggest week-over-week surges in investor interest, based on data from Trackstar, our proprietary sentiment indicator, have in common? The Juice answers that question in a minute. Spoiler alert: Jennifer Coolidge. Oh, wait! Wrong tab. Cracker Barrel (CBRL) and Cheesecake Factory (CAKE) have something in common with big mall-based department stores. Speaking of department stores… We wrote about them just yesterday. Now, we have a quick update that ties into today’s holiday food theme. Macy’s (M) and Nordstrom (JWN) execs recently presented at an investor conference. Both companies cited inflationary pressure as a reason for sluggish sales and holiday shopping pessimism. Obviously. But both also said something more interesting. From Macy’s: There’s less urgency and more concern over shopping this year. Less urgency because supply chain issues are gone and there’s a little extra time to shop for Christmas and Hanukkah this year versus last. More concern because people are worried about losing their jobs. Leave it to Elon Musk to show corporate America how lean you can really run. Assuming Twitter isn’t imploding as we speak. From Nordstrom: There’s inflation anxiety across demographics, particularly lower-income households. However, Nordstrom says: …we still see customers responding to newness and … higher-ticket items … For us, it’s not at all about lower prices doing well and higher priced items not doing well. If anything it’s the opposite. This jibes with The Juice’s haves and have-nots economic thesis. That the spending slowdown hits the cash-strapped the hardest. But consumers on sound financial footing continue to manage debt effectively and spend without much regard for how much things cost. |
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Consumer Behavior |
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For Here or to Go? |
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Key Takeaways:
Cracker Barrel and Cheesecake Factory both dropped and popped after reporting weak earnings and receiving analyst downgrades. Despite tepid outlooks from both companies, maybe investors think the sell-off was overdone. We don’t think so. It’s a difficult environment for sit-down restaurant stocks. Let’s toss around thoughts on why, followed by data on how people plan to eat this holiday season. Picture Suburbia Maybe you’re in it right now. This is a typical move, isn’t it? You hit up the local mall (strip, large format, or both). You shop till you drop. Then, as hunger strikes, you get back in the car, drive to the other end of the parking lot, slip the host a $20, and snag a table for four at your favorite chain restaurant. Maybe Cracker Barrel or Cheesecake Factory. If you fit into the category of the cautious holiday shopper, Macy’s, Nordstrom and countless others describe, you might skip the dine-in portion of your shopping excursion. If you’re doing well with money – and pardon the judgment here – you might not want to be caught dead in a Cracker Barrel or Cheesecake Factory. You’re going higher end, local, or both. Because it’s the holidays! Time to splurge. Makes sense? Maybe You’re Ordering In According to a November survey from the National Restaurant Association, 89% of consumers who plan to dine-in or order pickup or delivery cite deals and specials as the biggest consideration when figuring out where to eat. This is one reason why we tend to favor fast food stocks over full-service restaurants. The former are known for their well-advertised and aggressively-promoted deals. The latter, not so much. Another factor. Also related to inflation. The cost of food away from home has risen faster than the cost of food at home since August, making eating out less attractive. More tidbits from the NRA (not the National Rifle Association!):
We predict the well-heeled will do both. And lots of it. The struggling consumer will go the cheap route when eating out (fast food, baby!) or order via an app. While using platforms such as DoorDash (DASH) isn’t always less expensive, consumers, particularly Gen Z and millennials, might think:
The Bottom Line: All of this data we’ve compiled over the last few months doesn’t feel as if it makes much sense. You’re not crazy. It doesn’t. It’s confusing as hell. However, there’s still a straightforward investment thesis to pull from it: Stay out of the middle of the road. Go low end. Go high end. The middle of the road across consumer retail – including food – just doesn’t have the size, scale, and attendant marketing presence to compete in an environment where a large segment of consumers are cautious and an entirely different element are spending like drunken sailors. The low end will favor dollar stores and spring for the $5 coffee at Starbucks (SBUX). They won’t blow $100 for dinner at Cheesecake Factory. The high end will go to SBUX, wouldn’t even eat at Cheesecake Factory for the cheesecake, and will happily spring for luxury items and expensive dinners at local restaurants. To this end, we continue to like SBUX, Dollar General (DG), Dollar Tree (DLTR), and DoorDash (DASH) this holiday season. If you’re in the mood for risk, look to luxury brands and the chain best known for selling them – Nordstrom. There might be more to that comment the company made about high-ticket items doing well than meets the eye. |
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