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Papa John’s issued a business update that showed continued double-digit comp growth in June for the North American market. While comps slowed a bit versus the May trend (+24% in June vs. +34% in May), we are encouraged by the overall strong momentum.
Quick takeaways from Domino’s IR, Chris Brandon…
Domino’s focus on value, digital and loyalty should support comp momentum in the current environment.
The company has not seen meaningful trend divergences in states that are reopening.
Domino’s is better positioned for a prolonged recession than it was in 2008/2009, when the business was working through self-inflicted issues.
The beef shortage issues that impacted early-May comps have been resolved.
Trends have been improving in reopening states, driven by an increase in miles travelled rather than increasing dine-in mix.
The breakfast launch is showing good momentum (8% of sales in May), despite the launch coinciding with the onset of COVID.
Restaurant Brands International issued a business update on comp trends through the fourth week of June. Consistent with our most recent checks, Burger King and Tim Horton’s momentum have continued to improve from late March lows, while Popeyes trends are moderating a bit albeit at very high levels (partially due to lapping last year’s chicken sandwich launch). We think drive-thru centric brands remain well positioned, especially in states where COVID infection rates have ticked-up.
We are seeing an improvement over the last few weeks within restaurant and broader discretionary consumer trends. As expected, food retail, which benefits from shelter-in-place, is seeing the inverse trend - a slower growth rate than a month ago. In markets where there’s been a spike in infections, we’ve seen an increase in supermarkets sales growth and a slower recovery in restaurants. However, it appears that increasingly more consumers want to get out of their homes; and, those with secure jobs are eager to spend money.
Darden’s report showed continued signs of improvement into June. Current comp run-rates at its two big brands are still down more than -20% but are well above the lows we saw in late March (down over -75%) and to go sales seem to be relatively sticky (averaging ~40% of mix at Olive Garden and ~25% at LongHorn; also holding up well in re-opened states). F’1Q guidance (August-end) doesn’t imply much improvement versus current sales run-rates but could prove to be a bit conservative (states with increasing infection rates hadn’t seen any impact on sales to-date).
Our latest checks suggest a continued pick-up in restaurants as states reopen, along with moderating, albeit healthy, growth in the food retail sector.
Burger King’s largest U. S. franchisee reported positive SSS trends the first week in June. BK comps were up +2.5% for the week ending June 7th vs. bottoming out at -34% in late March. Popeye’s sales trends have also remained strong, posting double-digit growth each week since turning positive in mid-April.
Our latest U.S. consumer survey, where we asked more than 1,000 respondents to characterize coronavirus’ impact on daily routines and spending, shows broad improvement relative to our April survey. While trends were generally positive, there are still categories that look like relative outperformers (restaurants) and laggards (cruise and air travel). Our ongoing China survey works suggests somewhat better attitudes in that market relative to the U.S., which could bode well for further improvements in consumer sentiment in the U.S. going forward.
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