Dunkin’ Brands’ business update reflects continued week-over-week improvement in US comp trends, though the results highlight that recovery in QSR coffee continues to lag other QSR categories. Dunkin’ US comps have improved to -15% vs. a trough of -35% and a -25% run-rate from the week ended April 25th.
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Despite recent disruptions and temporary 1x costs, the company appears confident it can return to prior margin performance (e.g. 25% CRM on $2.5mm AUV; the ultimate mix of sales will impact the profitability somewhat).
Momentum across the system remains strong and the brand hasn’t seen any big change in performance within reopened states despite the increase in competition.
To-Go sales appear pretty sticky even as states lift shelter-in-place orders; the company was seeing nice momentum across geographies when it previously disclosed April trends.
Domino’s highlighted high digital mix (up to 75%-plus) and its self-fulfilled model as key tenets of its longer-term strategy (e.g. avoiding 3rd party aggregators).
We’re continuing to see modest week-over-week improvements in the broader QSR segment (comps at most concepts appear to be flat give or take a few percent; brands with heavier breakfast mix are likely lagging). Dine-in demand appears modest—some operators are deferring reopening given elevated sanitation protocols—but drive-thru demand remains strong with some high-volume dayparts running into capacity constraints. Looking ahead, we think there’s some risk promotional activity accelerates as brands compete to solidify share gains, but franchisees will likely push back given the backdrop (deferred rent obligations coming due, tight labor market, etc.).
Thor issued a business update earlier today where it outlined plans to accelerate production amid signs of tight dealer inventories. We’ve seen some supply issues across the leisure vehicle category (off-road, motorcycles, etc.), so this isn’t a huge surprise. Today’s announcement (5/29/20) follows commentary earlier in the week from Thor’s CEO suggesting improving traffic trends. While tight inventories could impact retail momentum, we view this as a high-class problem and expect the company’s flexible production model to help meet end-demand.
Restaurant Brands International issued a business update on comp trends through the third week of May. Consistent with our QSR checks, Burger King momentum has continued to improve from late March lows and Popeyes trends remain very strong. We think state reopening efforts could result in some near-term share shifts among restaurants (more choices for consumers, etc.) but drive-thru centric brands remain well positioned.
BRP reported a significant pick-up in off-road retail demand during the second-half of April, which is consistent with our checks. While coronavirus disruptions are forcing the company to adjust its marine strategy—e.g. discontinuing its Evinrude outboard engines—we think the remaining boat business provides a sufficient platform for innovation. Guidance calls for continued sales declines in the second half of the fiscal year (down -10% to -20%), but we’d expect investors to focus on the strong retail / market share gains.
Our latest cruise checks show relatively steady booking momentum of North America (down -55% to -65% over the past month), although we’re encouraged by the following developments: 1) new ‘cash’ bookings are finally outpacing rebookings; 2) cumulative bookings for 2020 improved ~100-300bps in recent weeks, which could suggest some pent-up demand and 3) we’d expect marketing to resume over the next few weeks.
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