Another restaurant heavyweight, Panera Bread (PNRA)PNRAPNRAPNRA, put up a great quarter, with earnings coming in at $1.50 per share, 7 cents ahead of estimates. Revenue rose nearly 18% to $530.6 million, and same-store sales were up 7.1%.
Buffalo Wild Wings (BWLD)BWLDBWLDBWLD, however, is suffering the wrath of the market after reporting earnings of 62 cents, 6 cents below the consensus estimate. Chipoltle's (CMG)CMGCMGCMG meltdown last week was a long time coming. This name has been putting up great results, but growth expectations have simply been too high.
Overall, restaurants are hanging tough, in my opinion, and consumers are not shying away, yet. That's despite the specter of rising commodity costs, and consumers who are said to be hunkering down.
As a value investor, I've typically taken positions in "second-tier" restaurant names, those that have faced challenges but have compelling assets, in my opinion, and are attempting to turn around.
I'm also anticipating Biglari Holdings' (BH)BHBHBH Aug. 13 release. Biglari Holdings is the parent company of fast-food chain Steak n Shake, and also owns a 17.3% stake in Cracker Barrel (CBRL)CBRLCBRLCBRL, a former holding of mine, (and my favorite chain).
Keep an eye on how restaurants are doing. Consumer sentiment surveys are often flawed, in my opinion. I'm more interested in how consumers actually behave than their responses to survey questions.
At the time of publication the author had positions in DENN, RT and BH.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.
Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.