Posts by Chris Nichols
When Brad Lamensdorf talks about Chipotle (CMG), the company, he'll discuss how management has gotten much right. When he talks about Chipotle, the stock, that's another matter.
On the stock, he's not at all positive, not at its current levels. As a result, an ETF he manages, the AdvisorShares Ranger Equity Bear, (HDGE) has a short position in the Denver-based burrito maker. Doing so worked out previously for the fund back in the spring of 2012, when the stock was around $365. Shares of Chipotle stumbled on earnings worries, and Lamensdorf covered with the stock at about $300.
Since then, betting against Chipotle has been a money-loser for the most part. The shares did fall 11.9% that year, but in 2013 rose 79.1% and in 2014 another 28.5%, according to FactSet. Lately, Lamensdorf grew interested again, shorting the stock at $672.
"The more they expand, the more they create kind of a problem for themselves," Lamensdorf says.
It's been a rough week for newly public burger chains, as players from the East and West Coasts have seen their shares pummeled on the heels of earnings reports.
This time around, it was Shake Shack (SHAK), one of the buzziest names in restaurants and a stock that has only traded far, far past its initial public offering price. Still, for the second day in a row, the results were met with selling. Shake Shack had risen 2.5% to $46.90 in regular trading, but it fell 6.2% to $44 after the numbers were released.
Shake Shack said revenue for the fourth quarter rose 51.5% to $34.8 million, while same-store sales were up 7.2%. The company lost 5 cents a share, although that included 4 cents of IPO costs -- without which the adjusted loss would be 1 cent a share. Generally, those results didn't seem concerning, as analysts were forecasting a loss of 2 cents a share and sales of $33.1 million, according to FactSet. Same-store sales were seen climbing 4%, Consensus Metrix estimates said.
It's quite a week for the better burger. Two new stocks in the premium hamburger group are reporting their first earnings results as public companies, and the first of those, Habit Restaurants (HABT), did so Tuesday.
When it did, the fourth-quarter numbers surpassed Wall Street's outlook -- although the view for 2015 appeared to be not enough for traders, as shares fell in the late session. Habit's stock rose in regular trading to close at $35.55, but after the report, it fell 6.2% to $33.34.
The California-based burger seller, which began trading last November, said revenue for the quarter was $48.4 million, up from $35.5 million in the prior year (which included an additional week), while same-store sales climbed 13.2%. Habit earned 2 cents a share. According to FactSet, analysts were planning on Habit to break even on a per-share basis, with sales of $44.4 million. Same-store sales were estimated at a 7.8% increase. For the year, revenue increased 45.1% to $174.6 million.
McDonald's (MCD) reported a horrific sales month for February, especially in the U.S., where same-store sales slumped 4%, a far-worse result than analysts had estimated.
Overall, global comparable sales fell 1.7%. The Asia-Pacific, Middle East and Africa again was weak, with sales down 4.4%, as recent news in Japan about foreign items in food continued to keep customers away. Europe was brighter, standing as the only major region with a positive number. There, same-store sales were up 0.7%.
The report was the first of its type under new CEO Steve Easterbrook. However, he started his new position only on March 1, and it will be some time before he's viewed as truly owning the monthly reports. His first week did include attending a gathering with franchisees and major news on a planned change around the chicken McDonald's sells, but the latest data make clear the challenges in front of the world's largest publicly traded restaurant operator.
Drive-in hamburger restaurant Sonic (SONC) was trading at its latest record price Monday, bringing its gain for 2015 to 23% and its increase in the past 52 weeks to 65%, after it reported a jump in sales at company-owned and franchised locations in the most recent quarter.
Recently, shares of Oklahoma City-based Sonic were up 5.3% to $33.47. The session high -- and now best ever -- was $33.93. The latest step up followed news that system-wide same-store sales for the second quarter ended Feb. 28 rose about 11.5%. Same-store sales were higher by 11.3% at company drive-ins and 11.5% at franchises, the latter of which are about 89% of the 3,500-store system.
Though the majority of Sonic's main valuation measures are above their five-year averages, according to FactSet, any concerns about its trading levels haven't prevented the stock from climbing to a series of all-time highs in a rally that's now in its fourth year. The compound annual growth rate was 59.4% from the close of 2011 through the end of 2014.
McDonald's (MCD) takes plenty of criticism, and there's certainly no shortage of advice on how to return the Golden Arches to its days of glory.
All it has to get the detractors and pundits to move along is the following: Serve better-for-you food that won't lead to obesity; do so cheaply and very quickly at 36,000 sparkling and modern global restaurants; offer plenty of menu choices, but not too many choices; pay workers a sound wage; buy goods at a fair price from suppliers who don't use hormones or antibiotics or rely on genetic modification; keep profit margins climbing for franchises and company-owned stores; ensure the dividend continues to get raised every year; and grow the stock price and profits annually for investors.
If only every company had it that good, right?
7. Make sure stores are clean and modern. Some are old, while others are brand new. The updates are ongoing, though theoretically the pace can be picked up.
McDonald's (MCD) stock had an unusually strong session Wednesday -- but it wasn't immediately clear what sparked the run.
The shares closed up 3.9% at $98.66, and at its high for the day of $99.31, the stock had risen 4.6% from Tuesday. Volume was considerably higher than normal as well, with almost 16 million shares traded. On an average day, 7.2 million McDonald's shares trade hands, according to Yahoo Finance data. At the same time, CNBC's Dominic Chu, commenting on Twitter, noted heavy volume in McDonald's call options, a bet the stock will advance.
The only obvious news in fact wasn't particularly positive -- that activists want European regulators to investigate the manner in which Oak Brook, Ill.-based McDonald's pays its taxes.
McDonald's hasn't yet responded to a request for comment. However, companies often have a policy or preference not to discuss stock-price movements.
Better ingredients, better pizza -- great. Now maybe better earnings?
With its stock trading at a record high, at a valuation matching its peak of at least the last five years, Papa John's (PZZA) wasn't in any position for a misstep before its fourth-quarter earnings release. And a misstep arrived.
Granted, it wasn't a tremendous one at all, but the fact that management offered a somewhat slower-than-anticipated profit growth outlook for 2015 was enough to edge the shares downward Wednesday. Again, this really is a matter of good or very good projections, so it's entirely possible the "shortfall" will be forgotten soon enough. If the market keeps rallying, consumer discretionary stocks keep jumping and restaurants keep rising, Papa John's may well keep climbing.
Now we have to see if that's enough to convince investors, after today, to resume elevating the shares.
Despite a shortfall on earnings per share, Domino's (DPZ) had such a strong quarter of sales, helped by its implementation of new technologies, that Wall Street traders were indicating the profit miss wasn't worth spending much time worrying about.
The Ann Arbor, Mich.-based pizza maker, trailing only Pizza Hut in terms of store count, said Tuesday that overall revenue growth was much better than analysts had anticipated in the fourth quarter, while same-store sales climbed around the world.
With all that considered, the stock, which has been trading at record levels, was lower by 1.1% to $103.31 recently. But to put that in perspective, it's not an especially significant step down since Domino's shares had a compound annual growth rate of 65% from the close of 2008 to the end of 2014. And because that rally has also elevated its valuation measures to five-year highs, were there a panic about profits it likely would have led to a more substantial decline.
Most of Domino's new stores are opening outside the U.S., with last year seeing 662 net new international stores among the 743 total.
For Domino's (DPZ) and Papa John's (PZZA), two of the nation's largest pizza chains, the mammoth multiyear rallies in their stocks mean neither has any margin for error. On Tuesday, they'll both get the opportunity to tell Wall Street that they're still getting it right -- or be left to explain why they didn't.
Quite simply, both have been stellar, delivering staggering profits to investors who've held onto the shares. Operationally, they've also been sound, helped along by getting customers to believe that, as chains go, they're top-tier, as well as by building ordering technology that meshes with our smartphone-centered lives.
Since the market rally began in 2009, all manner of stocks have ascended, whether good operators or perhaps not as good. Restaurants are no different, having been on the whole tremendous during the five-plus year run for shares. Betting against the industry (and stocks in general) has been only for the brave, but it's also meant so many equities are, in the often-repeated phrasing, priced for perfection.