A Cheesecake-shaped recovery: Morning Brief

Thursday, June 4, 2020

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National restaurant chains are sending positive signals about the economic recovery

All 50 states are now in some phase of an economic re-opening.

And some early indications from national restaurant chains are showing encouraging signs about consumer demand.

Late Tuesday, the Cheesecake Factory (CAKE) said in a release that at its locations which have re-opened, sales are back to 75% of what they were a year ago. And while these locations — which account for just 25% of the company’s footprint — still face capacity restrictions, the company’s data suggests a mix of in-restaurant and takeaway dining is proving to be a workable model.

“The reopened Cheesecake Factory restaurants have recaptured, on average, approximately 75% of prior year sales levels, reflecting continued strength in off-premise sales and building dine-in business,” the company said.

“For The Cheesecake Factory restaurants that are continuing to operate an off-premise only model at present, current weekly off-premise sales would equate to nearly $4 million per unit on an annualized basis, on average.” In 2019, the company’s average annual per-unit sales were $8.5 million, indicating most units are within 50% of their annual sales trajectory with takeout-only.

On Wednesday, Cheesecake shares rose 16%. Prior to Wednesday’s rally, the stock had dropped about 50% this year.

But The Cheesecake Factory isn’t alone in sending out positive commentary on consumer demand in the national restaurant space.

On Wednesday, Dunkin’ Brands (DNKN) said in an SEC filing that it has seen same-store sales rise on a week-over-week basis throughout the second quarter. For the week ended May 23, comparable store sales were down 15% over last year; just three weeks prior, sales were down 25% against last year, the company said.

And recent releases from the likes of Popeye’s (QSR), Papa John’s (PZZA), and Domino’s (DPZ) also indicate that consumers who had been mandated to make more meals at home are ready for something different.

In a May 26 release, for instance, Domino’s said, “We are seeing a tailwind as consumer behavior across the restaurant industry has shifted toward delivery and carryout.” And while the company noted it isn’t clear how long this trend will persist, after a shocking six week period from late March through all of April in which millions of consumers lost jobs, millions of restaurants closed, and news on the spread of COVID-19 seemed unrelentingly negative, it appears the consumer is set to resume its desire to take meals away from home.

Over the last decade, spending at restaurants and bars has risen faster than grocery stores and in 2015, food and drink away from home overtook grocery store spending for the first time and didn’t look back. That is until shelter-at-home policies were put in place across the country.

But even in April’s retail sales data, we can see grocery store spending already moderating. And this commentary from several chains suggests a snapback in spending at restaurants and bars could be coming in the months ahead.

Before the pandemic, spending at restaurants and bars had been rising significantly faster than spending at grocery stores. And recent commentary from national restaurants chains suggests it may not be too long before this trend resumes, despite the very large reversal seen this spring. (Source: FRED)

And while it is encouraging to see big, national restaurant brands talk about strong consumer demand, the real damage in the restaurant industry has come from small, local restaurants that can’t withstand the kind of economic shock that has resulted from the pandemic.

No one — not consumers, restauranteurs, or executives at major national chains — wants to see a world in which 50% or more of all independent restaurants go under because of forces beyond their control. Lawmakers can and should be working to help the industry survive this period.

Programs like the Payroll Protection Plan and the CARES Act were designed to help these smaller businesses bridge the gap between shelter-at-home measures and economic re-openings while the workers they were forced to layoff received enhanced unemployment benefits.

But with these programs set to expire in the months ahead, more needs to be done to help more restaurants and bars stay in business through a challenging economic period ahead.

By Myles Udland, reporter and co-anchor of The Final Round. Follow him at @MylesUdland

What to watch today


  • 8:30 a.m. ET: Trade Balance, April (-$41.5 billion expected, -$44.4 billion in March)

  • 8:30 a.m. ET: Initial Jobless Claims, week ending May 30 (1.84 million expected, 2.123 million prior)

  • 8:30 a.m. ET: Continuing Claims, week ending May 23 (20.05 million expected, 21.05 million prior)

  • 9:45 a.m. ET: Bloomberg Consumer Comfort, week ending May 31 (35.5 prior)



  • 4:15 p.m. ET: Broadcom (AVGO) is expected to report adjusted earnings of $5.14 per share on $5.70 billion in revenue

  • 4:15 p.m. ET: Gap (GPS) is expected to report an adjusted loss per share of 66 cents on $2.26 billion in revenue

  • 4:15 p.m. ET: Slack (WORK) is expected to report an adjusted loss per share of 6 cents on $187 million in revenue

  • Other notable reports: DocuSign (DOCU), PagerDuty (PD)


Top News

Senate passes changes to small business PPP loan program [Bloomberg]

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China easing airline access amid conflict with Washington [AP]

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Drew Brees on potential return of NFL kneeling protests: ‘I will never agree with anybody disrespecting the flag’

Walmart leadership denounces ‘senseless’ George Floyd killing, embraces ‘more just and fair country’

COVID-19 crisis highlights housing inequality faced by black Americans

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