Barclays | U.S. Restaurants
14 August 2019 6
Restaurant Comp Trends
Comps drive earnings, earnings drive multiples, and multiples drive stock price performance
(in theory). Below we highlight restaurant sector stock performance relative to the S&P 500
for two distinct periods related to 2Q19. The left chart captures performance from the start
of 2Q19 (3/29) through the last day prior to the beginning of 2Q19 earnings (7/22), while
the right chart captures post-earnings performance through Tuesday’s close (8/13).
Following modest sector stock price underperformance relative to the S&P through mid-
May, the sector then traded in line with the broader market for the remainder of May and
much of June, as relative comp momentum was sustained and as elevated cost pressures
likely overshadowed any possibility of holding the line on restaurant margins. Ultimately, the
sector modestly underperformed the S&P in 2Q19.
And since the start of reporting 2Q19 earnings (7/22), our coverage has reverted back to
outperformance (+300bps) through mid-August (8/13), supported by commentary by
many restaurants indicating 2Q19 top-line performance that was better than feared
(despite an easing for many in July), coupled with ongoing market volatility related to tariffs,
which has little impact on our restaurants.
FIGURE 9
Barclays Restaurant Stock Performance, 3/29/19 - 7/22/19
FIGURE 10
Barclays Restaurant Stock Performance, 7/22 - 8/13/19
Source: Refinitiv and Barclays Research.
Past performance is not necessarily indicative of future results
Source: Refinitiv and Barclays Research.
Specific to restaurant management color...
Most offered cautious commentary when describing 2Q19 results and their outlook for
3Q19. Importantly, most alluded to relatively steady trends to close 2Q19 (i.e. June),
reflecting a stabilization with some clawback relative to April, which was negatively
impacted by unfavorable holiday / spring break shifts. As for 3Q19 QTD (i.e. July), the select
few that offered color noted either an easing of trends or cited difficult upcoming compares,
and such was supported by third party indices. Looking back, the top three factors
explaining the in-line-ish 2Q19: 1) ongoing benefits from a sustained rise in wages and
disposable income, 2) continued favorability on macro factors such as consumer
confidence and employment, & 3) strong growth in ‘incremental’ off-premise sales, with
most noting outsized check growth on both pick-up & delivery.
96
98
100
102
104
106
108
SPX Barclays Restaurants Index
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98
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102
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SPX Barclays Restaurants Index
Since the start of reporting
2Q19 earnings (7/22), our
coverage has reverted back to
outperformance (+300bps)
through mid-August (8/13).
As for 3Q19 QTD (i.e. July), the
select few that offered color
noted either an easing of
trends or cited difficult
upcoming compares.