Securities analysts covering the foodservice industry largely agreed in research notes written this week that moderately improving macroeconomic conditions would likely favor fast-casual restaurants and other brands with higher-income customers as those companies report second-quarter results.
Industry watchers also indicated that second-quarter sales and profit would likely improve sequentially from a more difficult first quarter, and that food and labor cost pressures would be more favorable than originally thought for the quarter and the second half of 2013.
With nearly all restaurant companies but Darden Restaurants, Del Frisco’s Restaurant Group and Yum! Brands yet to report, industry watchers expected second-quarter results to reflect “choppy” macroeconomic conditions. They generally agreed that the specialty-coffee and fast-casual segments would likely hold up the best if consumer demand for eating out stays flat or improves slightly, as expected.
David Tarantino of Robert W. Baird & Co. projected demand for restaurants to be similar in 2013 to what it was in 2012, with full-year traffic about flat and same-store sales slightly positive.
“All five macroeconomic factors in our proprietary industry traffic model — consumer confidence, gasoline prices, consumer credit, housing conditions and stock market volatility — are trending neutral to favorable on a year-over-year basis,” he wrote, “suggesting prospects for healthy demand trends, all else equal. Based on the positive trends … demand can hold up well in the balance of 2013, excluding any potential impact from higher payroll taxes.”
Chains catering to lower-income customers, who still report lower levels of consumer confidence and employment, likely would have a harder time growing sales and earnings in such a low-growth environment, he wrote.
“Based on this data,” Tarantino wrote, “we generally are more optimistic about top-line fundamentals for specialty-coffee concepts like Starbucks and fast-casual brands like Chipotle Mexican Grill and Panera Bread than we are for QSR chains and certain casual-dining concepts.”