Thanks Van. I went into a Wendys yesterday and it was thriving.
Optimism emerges on restaurant stocks amid lighter inflation impact, looser labor market
Jul. 13, 2022 3:42 PM ET
Analysts are optimistic on the prospects for restaurants as the space absorbs commodity inflation and looks toward easing staff shortages.
In a
hot CPI report printed on Wednesday morning, food away from home was a rare bright spot. While the food at home index rose 12.2% from the prior year, the largest 12-month increase since 1979, food away from home was far less impacted. The latter index rose only 7.7%, with limited service meals rising “only” 7.4% over the same period.
While both figures are the largest increases seen in over 40 years, the significantly lower inflation recorded by restaurants suggests some capacity to absorb increased costs. Additionally, there are signals that the inflation impact on key items like chicken breasts, wheat, and more are peaking in the current quarter, per Cowen research.
Cowen analyst Andrew Charles indicated that checks with CEOs at multiple fast casual chains suggested that
food costs are coming down in the third quarter.
“Commodity inflation was acute in 2Q, in particular chicken breast, wheat, packaging & Freight,” he told clients. “Encouragingly, both panelists suggested cautious optimism that commodity costs have peaked, with more meaningful relief expected in the coming months as oil prices have tapered, a leading indicator of soft commodity costs.”
Ahead of a busy earnings season, Charles expects this to be a key point that could portend the trajectory of the company’s set to report.
Further, the significantly lower inflation among quick service and fast casual restaurants as compared to 8.9% inflation in full-service is likely to aid in a trade-down impact. Charles indicated this is likely a positive for Chipotle Mexican Grill (NYSE:
CMG),
Shake Shack (SHAK), and
Sweetgreen (NYSE:SG) as well as quick service restaurants like Yum Brands (
YUM), McDonald’s (
MCD), and more. The higher level of inflation at casual dining and sit-down service restaurants were pointed to as likely drivers of outperformance at the comparatively cheaper sectors.
In another positive for the overall sector, Cowen indicated that lessening labor shortages are “the biggest source for optimism” in their chats with CEOs. While aiding in service, Charles expects the looser labor environment is also likely to aid in normalizing pricing.
Shake Shack (SHAK, 4.43%), Sweetgreen (SG, 3.49%),
Portillo’s (PTLO, 3.49%), Domino’s Pizza (DPZ, 2.83%), Kura Sushi (KRUS, 4.32%),
Wingstop (WING, 2.18%), Jack in the Box (JACK, 2.01%), and Restaurant Brands (QSR, 1.65%) led gains in the space shortly before Wednesday’s close.//
I kid you not a HF guy pitched me Wingstop just a week ago. He toldme their price fpor chicken had gone way down.// They sell alot of chicken...
Has anyone been top a Wingstop? Are they tasty?
Best wings I ever had Manhattan Beach CA Swayzies? Something like that. OMG-!
