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Restaurants feel positive about their industry, according to the latest Baird Morning Note.
Baird hosted a Global Consumer, Technology and Services Conference last week, where they hosted 12 restaurant companies.
Those companies were Dutch Bros Inc. (NYSE:BROS), The Cheesecake Factory Inc. (NASDAQ:CAKE), CAVA Group Inc. (NYSE:CAVA), Chuy’s Holdings Inc. (CHUY), Chipotle Mexican Grill Inc. (CMG), Krispy Kreme Inc. (DNUT), Jack in the Box Inc. (JACK), Portillo’s Inc. (PTLO), Shake Shack Inc. (SHAK), Texas Roadhouse Inc. (TXRH), Wingstop Inc. (WING), and Yum! Brands Inc. (YUM).
Analysts gathered takeaways from the conference:
- During the recent quarters, there has been solid traffic performance, particularly for (CAVA), (WING), and (TXRH). “The ongoing divergences in traffic fundamentals might be a sign that certain groups of consumers (particularly lower-to-middle income) are becoming more discerning about how they are allocating their spending amid what appears to be a choppy economy,” wrote Analyst David E. Tarantino.
- However, there is optimism about internal sales-driving initiatives to support sales trends in the second half of this year, with areas of focus such as menu and value innovation, marketing and loyalty initiatives, and more effective operations.
- Some companies said they are more focused on highlighting better price points and/or value offers. Those include (YUM), (JACK), (CHUY), and (SHAK).
- Most companies said they are “staying the course with development” despite macro uncertainties. Some companies said construction costs are starting to stabilize, and others said they are working on more cost-effective prototypes “to strengthen the ROIC (return on invested capital) equation.” Those include (PTLO), (BROS), (SHAK), (JACK).
- In addition, companies said they are “generally comfortable” about their near-term margin outlook, noting the better commodity backdrop and improved staffing and labor retention now at or above pre-Covid levels.
- Lastly, companies also are “increasingly focused” on using AI and other technology tools to enhance their operations, such as improving the speed of service, better labor deployment and kitchen efficiency.