Early Stages of Recovery Signal Future Growth for the Restaurant Industry: An Expert Analyst Discusses the Outlook for the Sector with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - March 13, 2013 - The Wall Street Transcript has just published its Restaurants, Food and Drinks Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Shift Toward Healthier Food Options - Emerging Market Expansion - Focus on Brand Equity - Store Sales Growth Trends - Cautious Consumer Spending

Companies include: Chipotle Mexican Grill, Inc. (CMG), Panera Bread Co. (PNRA), McDonald's Corp. (MCD), Wendy's/Arby's Group, Inc. (WEN), Buffalo Wild Wings Inc. (BWLD), The Cheesecake Factory Incorporated (CAKE), Krispy Kreme Doughnuts Inc. (KKD), Red Robin Gourmet Burgers Inc. (RRGB), Darden Restaurants Inc. (DRI) and many more.

In the following excerpt from the Restaurants, Food and Drinks Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Let's start with an overview of your coverage universe.

Mr. Slabaugh: We cover a pretty wide variety of both casual dining and QSR, and then a little bit of fast casual. It's probably a little heavier focus on casual dining as of right now, and I would say that when we take a look at our list now, we expect to evolve a little bit more into the quick-service universe - so a little bit more QSR, a little bit more fast casual - because I think that's who is gaining share right now.

TWST: Perhaps it varies based on those different segments, but overall how are the restaurant companies faring today?

Mr. Slabaugh: It's been very mixed. Ever since the beginning of the fourth quarter of last year, things have been choppy to say the least, and it's been a case of haves and have-nots. Many months have been negative; many months have been just flat to slightly positive, so there hasn't been a great direction out of any of the data that we have seen. There has been, I would say, an increased fear from investors and an increased concern from operators as far as what the macro environment is going to bring. That includes, what is the impact going to be from the payroll tax increase, the fiscal cliff, Obamacare, any sort of debt crisis, etc. So there are many things that operators and investors are worried about within the space, and I think that on top of a shaky consumer, this has given most investors a lot of pause when they take a look at the group to begin the year.

TWST: Perhaps it varies based on those different segments, but overall how are the restaurant companies faring today?

Mr. Slabaugh: It's been very mixed. Ever since the beginning of the fourth quarter of last year, things have been choppy to say the least, and it's been a case of haves and have-nots. Many months have been negative; many months have been just flat to slightly positive, so there hasn't been a great direction out of any of the data that we have seen.

There has been, I would say, an increased fear from investors and an increased concern from operators as far as what the macro environment is going to bring. That includes, what is the impact going to be from the payroll tax increase, the fiscal cliff, Obamacare, any sort of debt crisis, etc. So there are many things that operators and investors are worried about within the space, and I think that on top of a shaky consumer, this has given most investors a lot of pause when they take a look at the group to begin the year.

TWST: Please talk about each of the dining segments and how they are faring as haves or have-nots.

Mr. Slabaugh: What's interesting is the dynamic that we saw last year from a stock perspective. The family diners, what you think of as your older demographic - slower growth, no unit growth really to speak of - those guys outperformed from a stock perspective pretty significantly over QSR, fast casual and casual dining. I think a lot of that was sort of a catch up, because people were undervaluing those names, and I think to an extent still are.

When we look at what's actually happening out there in the restaurant environment, what we are seeing now and what we will continue to see is the quick-service segment, both QSR and fast casual, continue to slowly take share from casual dining...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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