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Domino's: Key Points from 3Q19

  • 3Q19 comps increased +2.4% (+8.7% on a 2-year stacked basis).
  • Pressure on the delivery business (which is still comping positive) is driven by its fortressing strategy & aggressive aggregator delivery pricing (which Domino’s believes is unsustainable) which benefits smaller pizza players who were not previously able to offer delivery.
  • Conversely, impressive carryout growth reflects: value (more variety at the $7.99 price point); effective ads; store updates (90% of the system reflects pizza theater image); & fortressing which brings stores closer to the customer. Carryout mix now approaches 45% of total orders.

Olive Garden: Key Points from fiscal 1Q20

  • Fiscal 1Q20 comps increased +2.2% (-0.8% traffic/+2.2% pricing/+0.8% mix), representing a +3.4% comp outperformance to the industry. Results reflected: strong execution; everyday value; convenience; healthy guest satisfaction ratings; & catering.
  • Weakening industry trends are unusual given the economic strength of the consumer. While corporate reported strength in QSR & fast casual (reflecting income growth for the lower income demo), it is unclear if consumers are trading down from casual. In any case, the large chains are still taking share from the independents on a national level (although independents are gaining share in the wealthier trade areas).
  • We suggest that it is possible that delivery fees maybe the culprit by taking share from restaurant industry sales.

Red Robin 2Q19: Key Points

  • 2Q19 comps declined -1.5% (-6.4% traffic/+2.6% net pricing/+2.3% mix), representing the best performance in 5 quarters. According to plan, the brand de-emphasized its $6.99 Tavern burger line (mix was down to 10% from 16.5% during 2Q18) with a higher mix from entrées & its Finest line.
  • Traffic at enclosed mall locations (now representing 66 restaurants after closing 7 units in 2Q) continue to underperform the balance of company stores by -300 bps. While $3MM AUVs at enclosed mall locations are slightly higher than non-mall locations, higher rents translate into a -500 bps margin underperformance.
  • Overall guest satisfaction scores, which had declined throughout last year to a low point at the end of 4Q18, has shown steady improvement throughout 2019, rising to its highest level in 3 years during the first period of 3Q19. Stores with top quartile scores are generating positive traffic & sales.

Chili's fiscal 4Q19: Key Points

  • Fiscal 4Q19 system comps increased +1.3% and the +1.5% company store comp included +3.9% pricing, -1.9% mix & -0.5% traffic. Results reflected a y/y decrease in promotional direct loyalty marketing (-60 bps) to go with a +3.3% menu price increase which was unusually high because of timing issues during the quarter. Annual pricing should continue to run +1.5% to 2%.
  • While brand management has been focused on keeping operations simple by foregoing any LTOs or new initiatives, going forward plans will seek to layer in innovation & marketing support for the 3 for $10 platform in order to better target value-oriented guests who tend to frequent casual more so than higher-end customers.

Carrols (BK) 2Q19: Key Points

  • 2Q19 comps (excluding recently acquired restaurants) increased +0.1% (+0.9% pricing/-0.5% mix/-0.3% traffic). Results reflected a difficult y/y comparison with a +5% 2Q18 comp increase that benefitted from an increased amount of discounting at that time. In any case, BK has been seeking to increase its value positioning which resulted in a +200 bps 2Q19 sequential increase in Carrol’s discounting mix over 1Q19.
  • Softer sales were reported in their southeast markets (1/3 of total) along with underperformance in the breakfast & lunch day parts.