Coverage

All Reports:

Starbucks Corp. (SBUX)
Mark Kalinowski

SBUX: Multiple Advantages vs. Unions

While we continue to view unionization of some U.S. company-owned Starbucks stores as offering zero meaningful positives from the perspective of Starbucks (and its shareholders), it is important to remember multiple key advantages that Starbucks has and that are likely to persist for many, many years to come. Bottom line: while a modest amount of U.S. company-owned Starbucks stores are likely to be unionized at any given time (200+ at present, out of approximately 9,000 total), Starbucks is unlikely to be meaningfully impacted adversely, other than so-called “headline risk,” the worst of which may already be over. Here are some key reasons why:

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Papa John's International, Inc. (PZZA)
Mark Kalinowski

PZZA: Some Cheesy Adjustments to Our EPS Estimates

On August 4th, when Papa Johns reported its Q2 earnings and hosted its related conference call, the company noted that its commodity costs were up by +18% year-over-year in Q2. The company cited cheese as a particular concern.

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Restaurant Industry
Mark Kalinowski

Restaurants: Market Share vs. Grocery Stores Just Below All-Time High in July

Data out today from the U.S. Census shows that restaurants’ market share (with grocery stores making up the other component) was 54.9% in July 2022. This is a year-over-year improvement of +60 basis points from the July 2021 number of 54.3%. In addition, the 54.9% figure is a mere -10 basis points below the all-time monthly high of 55.0% (first set in April 2022).

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McDonald's Corp (MCD)
Mark Kalinowski

MCD: Building a Happy Meal for Investors

There are multiple potential positives regarding McDonald’s U.S. business that the Street may not be currently appreciating. For example, McDonald’s reported its Q2 earnings on July 26th, but did not quantify (or otherwise meaningfully comment on) July same-store sales trends at that time. Subsequent to that date, though, Wendy’s (WEN; Buy, $21.40) noted on its August 10th conference call that “we expect a significant step-up in one-year same-restaurant sales in the back half of the year, and our results through July are accelerating as planned.” In addition, on August 11th, the largest Burger King franchisee in the U.S., Carrols (TAST; Not Rated) – which operates over 1,000 Burger King restaurants – remarked that “During the second quarter, comparable restaurant sales at our Burger King restaurants increased 2.8% against a robust 12.6% comparison from the prior year period. The monthly sales trend demonstrated building momentum, with negative comparable restaurant sales in April as we lapped the end of the stimulus payments benefit, followed by mid-single digit growth in both May and June which has extended into July.” We believe that these trends are indicative of a good July for the U.S. quick-service burger sector in general, including segment leader McDonald’s (which we believe outperformed the sector to some degree).

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Wendy's (WEN)
Mark Kalinowski

WEN (Post-Call): Unit Growth Plans thru 2025 Snagged on a Reef

Earlier today, Wendy’s reported adjusted Q2E EPS of $0.24, matching our $0.24 forecast, and coming in above sell-side consensus (according to Consensus Metrix) of $0.22. Wendy’s bumps up its full-year 2022 adjusted EPS target range to $0.84-$0.88 (previously $0.82-$0.86).

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