This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Boring Sit-Down Restaurants Suddenly Look Lively

NEW YORK (TheStreet) -- Fast casual restaurants Chipotle (CMG - Get Report) and Starbucks (SBUX - Get Report) have been delivering eye-popping sales increases in the United States for the better portion of two years. The losers from the shift in consumer preferences to quicker service restaurants have been the traditional, full-service restaurants like Brinker International (EAT - Get Report) and Darden (DRI - Get Report).

However sales data from the second quarter for the publicly traded full-service restaurants suggests they may not be dead after all.

Watch More: Buffalo Wild Wings CEO Tackles the Future with Innovation

According to Bloomberg's Knapp-Track, full-service casual dining comparable sales may fall 1.1% in July, which would reverse the prior month's departure from fourth months of sequential improvement. Comparable sales growth is still negative as a result of traffic declines.


WATCH: More market update videos on TheStreet TV | More videos from Brian Sozzi

Mirroring this weak fundamental performance, the Bloomberg North American Restaurant Index's total return has amounted to a mere 1% year to date vs. the S&P 500's total return of 5.7%. Per Bloomberg, the index dropped below that of the S&P 500 in April amid worse-than-expected first-quarter financial figures borne from extreme weather conditions.

The attention by the market remains on the full-service restaurant industry's years of market share loss, with little credit being given those companies implementing successful menu price increases, streamlined menus that enhance operating efficiency, low-calorie items that favor the move to healthier lifestyles and remodels that improve guest experience.  Underscoring the market's lack of appetite in the full-service casual dining sector, shares of Darden have shed 13% year to date, while shares of Brinker International have underperformed the S&P 500 with a 0.22% year to date rise.

In its fiscal fourth quarter, Brinker International had gains in same-restaurant sales in all three months of the period at both its Chili's and Maggiano's brands. Citing menu price increases, Chili's and Maggiano's logged same-restaurant gains of 2.5% and 0.9%, respectively, in the quarter, outpacing the comparable sales results supplied by the aforementioned Knapp-Track.

Read More: Why Target's New Comments Should Worry Investors

Dinequity's (DIN) Applebee's and IHOP concepts had 0.6% and 3.2% respective same-restaurant sales increases in the second quarter, also stronger than Knapp-Track. For their part, Chipotle and Starbucks, the fast casual chains, had robust quarters yet again, posting 17.3% and 6% domestic sales increases.

The losers from the second quarter: quick-service operators McDonald's (MCD - Get Report) and Burger King (BKW) -- their domestic same-restaurant sales fell 1.5% and rose 0.4%, respectively. Each of the quick-service players seem to now fall into a gray area in the restaurant business, lacking the sought after menu items at Chipotle and Starbucks and improved service levels and experiences being found at full-service chains.

Watch More: Norwegian Cruise Line CEO Outlines Earnings Beat Strategy

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
CMG $626.44 0.00%
EAT $56.09 0.00%
DRI $64.75 0.00%
MCD $98.99 0.00%
SBUX $51.48 0.00%

Markets

DOW 18,232.02 -53.72 -0.29%
S&P 500 2,126.06 -4.76 -0.22%
NASDAQ 5,089.3620 -1.4320 -0.03%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs